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March 10, 2021

Summons and notices being now issued for Pre-GST Cases

by CA Jessica Nagaonkar in GST

Summons and notices being now issued for Pre-GST Cases

The reasons for bringing the GST regime to the tax structure in the country were to rationalize the indirect tax regime of the country to inhibit the “cascading effect” of tax and create a common market for goods and services in the country. The government pitched ease of doing business, investor friendliness and economic growth as the necessary underpinnings for this under the “one nation-one tax” vision. The government’s vision could not be realized without a robust dispute settlement system which catered to efficiency in disposal of disputes while keeping litigation costs low. The GST regime had introduced a thorough and extensive framework related to the various kinds of disputes that could arise out of the entire GST regime. 

Tax officials often act as quasi-judicial authorities in disposing of taxation disputes between the taxpayer and the government. The resolution of disputes requires keen investigation and access to evidences like financial documents, invoices, account statements etc. Though there are powers of searches, raids etc which has been provided under taxation laws, yet it becomes very important to ask the taxpayer for production of required documents themselves before initiating any coercive actions like searches and raids. Hence, in order to facilitate the taxpayer before coercive action, there is power to summon. Summons, basically is intimation requiring a person to whom it is issued to appear to give evidence and or produce documents etc.

A series of tax notices and summons have been sent out to taxpayers from the indirect tax authorities in Mumbai and some other tax zones across the country. The queries through letters and summons relate to cases predating June 2017 rollout of Goods and Services Tax (GST) and also includes cases where taxpayers had opted for resolution under the Sabka Vishwas Legacy Dispute Resolution Scheme (SVLDRS), 2019.

What is SVLDRS?

SVLDRS is a dispute resolution scheme for pending service tax and excise cases that was announced in the Budget for FY20. The Scheme allowed “quick closure” of the litigations pertaining to the pre-GST regime. Under this scheme, relief was to the tune of 70% of the duty involved if it was Rs 50 lakh or less and that of 50% if it was more than Rs 50 lakh. This was for cases pending in adjudication or appeal or in investigation and audit. In cases of outstanding arrears of revenue, the relief was 60% of the duty amount if it was Rs 50 lakh or less and 40%, if it was more than Rs 50 lakh.

The following cases are covered under the Sabka Vishwas Scheme, 2019-

  • A show cause notice or appeals arising out of a show cause notice pending as on the 30th day of June, 2019
  • An amount in arrears
  • An enquiry, investigation or audit where the amount is quantified on or before the 30th day of June, 2019
  • A voluntary disclosure

Summons under GST

Power to summon is mentioned for GST cases under section 70 of the CGST Act 2017. Section 70 of CGST Act provides powers to tax officers to summon persons to give evidence and produce documents.

According to Section 70, the proper officer shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908.

What was asked for in the summons?

Summons were sent citing an inquiry in connection with SVLDRS filed under voluntary disclosure under the CGST Act, 2017.

The summons sent to multiple taxpayers in Mumbai zone, have asked for service tax returns, balance sheets, profit and loss accounts, CENVAT credit for financial years 2015-16, 2016-17 and 2017-18 (till June 2017).

Separately, in some other cases, queries have been sent with a 7-day response deadline for cases relating to service tax payments before GST rollout, industry sources said.

Why are summons now being sent for older cases?

The series of notices could be reflective of lower revenue stream in the aftermath of the Covid-19 pandemic. The government has revised down its estimated revenues from direct and indirect taxes for 2020-21 financial year. GST mop-up is estimated to be lower by Rs 1.49 lakh crore and customs duty collections estimated to be lower by Rs 26,000 crore compared to the budget estimates for this fiscal.

Tax authorities could also initiate inquiry for a period backdating five years if there is a case of mala fide intent. Even though the SVLDRS scheme ended long ago, and applications were accepted then, tax authorities could ask for information within five years if there is a mala fide intent.

The queries sent by tax authorities came even as the CBIC had separately directed its field offices to exercise utmost prudence and maximum caution in attachment of property of a taxpayer in cases involving GST evasion, stating that such a remedy could be considered only in cases involving evasion, fake invoicing and delay of more than three months in depositing tax collected and that the value of the property attached provisionally was not excessive.

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