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October 8, 2021

Guidelines for conducting GST inspection, evolving proposals & adjudication

by Admin in GST

Guidelines for conducting GST inspection, evolving proposals & adjudication



Circular No: 23/2021
(PP2/GST- 15/54/2021)

Date: 04.10.2021

Sub: TNGST Act, 2017- Conduct of inspection under section 67 of the Act- Power to adjudicate as a result of inspection- Certain instructions- Issued.

Ref: 1. Notification No.4/2017 dated 12-07-2017

2. CCT Circular No.72/2019 (Rc26/2019 A1/ Taxation) dated 31-5-2019.

In the circular second cited above, it has been instructed that the officers of the intelligence wing have been permitted to exercise the powers vested in section 62,63,64,73 and 74 of the TNGST Act, 2017 in respect of cases inspected by the said officers.

2) This has been examined again at great length. There are certain issues arising out of such empowerment of officer who concluded inspection to raise demand as adjudication officer. In order to demarcate the functions of inspection and adjudication independently without influence from each other, the instructions issued in the circular second cited is withdrawn with immediate effect.

3) The following guidelines are issued for conducting inspection, evolving proposals and adjudication of the same:

i. Section 2(4) defines adjudicating authority, inter-alia, as one who is authorized to pass any order or decision under this Act.

ii. Section 65(7) empowers a proper officer to initiate action under Section 73/74 after conduct of audit.

iii. Section 67(3) provides for return of seized documents, etc., not relied upon for issue of any notice under GST Act, within one month of issue of notice.

iv. Sub-section (10) of Section 73/74 of the Act empowers a proper officer to issue an order determining the amount of tax not paid or short paid, ITC wrongly availed or wrongly utilized, interest, etc., after issuance of a show cause notice under sub-section (1).

v.  Section 75 provides for opportunity of hearing, adjournment, etc., and other general provisions regarding passing of orders relating to determination of tax.

vi. Section 107 provides for appeal against any decision or order passed under the GST Acts.

4) On a conjoint reading of the above provisions, it becomes clear that an audit or inspection, if it results in unearthing of any tax short paid, ITC wrongly availed, etc., a show cause notice has to be issued by the proper officer for determining the liability under Section 73/74 of the Act as the case may be, followed by passing of an order by an adjudicating authority.

5.1) In order to issue such show cause notice, the adjudicating authority needs grounds/ materials and therefore it is imperative that the inspecting officer has to draw a detailed report on the findings of inspection conducted by him/her. Thus, the inspecting officer as stipulated in Circular No.10/2019 (Q1/17253/2019) dated 31-5-2019 has to submit his/her report with specific findings of each item of discrepancies/defects noticed quantifying the amount of turnover, tax and penalty to the Deputy Commissioner/Joint Commissioner of Intelligence Wing concerned.

5.2) On receipt of the inspection report from the inspecting officers, the Joint Commissioner should examine the same with the defects noticed in the IF approved. They have to see whether all the issues to be examined as contained in the IF, have been examined and discussed in the said inspection report and on satisfying the same, the inspection report could be approved by them. If any point/s as contained in the IF has/have been omitted to be discussed in the inspection report then the inspection officers concerned should be directed to examine the omitted point/s of the IF and resubmit the inspection report to the Joint Commissioner.

5.3) Once the inspection report is approved, the group head of Inspecting team shall send his report along with documents collected at the time of inspection to the jurisdictional proper officer within the stipulated time of 30 days from the date of conclusion of inspection. The inspection team shall send the inspection report through back office system itself to the jurisdictional proper officer concerned. A task for adjudication has to be auto generated to the proper officer login once the inspection team sent the inspection report in the portal. A separate MIS report will be created to watch the progress on the follow up action on the number of inspection report sent by inspection team and status of adjudication from proper officer side. However, until the development of the back office, the inspecting officer must send the inspection report manually to the proper officer concerned. Both inspecting officer and jurisdictional proper officer shall maintain suitable registers for this purpose and these registers have to be checked by the Deputy Commissioner concerned during the time of inspection of the subordinate offices.

6) On receipt of the above report, the jurisdictional proper officer shall issue show cause notice under section 73/74, as the case may be, without mentioning the correspondence details received from the Intelligence wing within 15 days from the date of receipt of the inspection report. Though the show cause notice must contain the details of inspection report, it should not be merely reproduction of the same.

7) The jurisdictional proper officer shall afford personal hearing wherever the taxpayer requests or where adverse decision is to be taken and the provisions contained in section 75 of the Act should be strictly adhered to while passing adjudication order under section 73 or 74 of the Act.

8) If the proper officer finds that any of the proposals contained in the show cause notice issued, based on inspection report, required to be dropped with reference to objections filed by the tax payer based on valid documentary evidence or any other valid legal grounds, he> has to record his/her specific findings to that effect.

9) The adjudication proceedings shall be completed on priority basis, by the jurisdictional proper officer and this performance should be monitored by the Deputy Commissioner concerned.

10)    The territorial Deputy Commissioner has to examine the adjudication orders passed by his subordinate proper officers and satisfy himself as to the legality or propriety of the said adjudication order and decide to file appeal before the first appellate authority or otherwise.

11) The Joint Commissioners (Intelligence) and (Territorial) are requested to monitor this activity periodically and issue suitable instructions to their subordinates to finalise those cases where revenue involved is huge.

12) It is emphasized that the taxpayer should not be put to undue harassment since firstly he has to answer the inspecting officer and then to the adjudication officer and hence due care must be taken to finalise the inspection report and also the adjudication order.

13) It is reiterated again that the entire process of issue of show cause notice, affording of personal hearing and passing of adjudication orders shall be system based and no manual process may be allowed.

14) The transition provision to the new system will be as follows:

For the Inspection completed and adjudication initiated as on 04.10.2021, by way of issue of Notice etc., such cases have to be pursued by the inspecting officers themselves and in those cases where inspections completed and adjudication have not been initiated by the inspecting officers, inspection reports as stated in para 5.2 and 5.3 must be sent to the jurisdictional officer for further action.

Sd/- M.A. Siddique
Principal Secretary/
Commissioner of Commercial Taxes


All the Joint Commissioners (ST) (Territorial) in the state including LTU

Copy to:

1. The Secretary to Government, CT & R Department, Chennai – 600 009.

2. All Additional Commissioners, 0/0 the CCT, Ezhilagam, Chennai – 600 005

3. The Joint Commissioner (CS) to host in the departmental website

4. The Director, Commercial Tax Staff Training Institute, Chennai-6

5. The Secretary, TNSTAT, Chennai 600 104.

6. All the Joint Commissioners (ST) (Intelligence) in the state

7. All the Deputy Commissioners (ST) in the State including intelligence

8. All the heads of assessment circles Stock file

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