The Central Board of Indirect Taxes & Customs (CBIC) has advised its officers to avoid issuing show cause notices (SCNs) under GST recklessly, as it will lead to litigations. This instruction has come as the new due date for issuing SCNs related to FY19 approaches its end on January 31, 2024.

Last week, businessline reported that with the new due date approaching, businesses are bracing for a flurry of show-cause notices from GST officials for FY19 regarding any possible shortfall in tax payment. Similarly, the new due date for SCNs related to FY20 is June 30, 2024.

In a communication to taxmen, CBIC Chairman Sanjay Kumar Agrawal said, “It needs to be kept in mind by proper offices that the issuance of show cause notices should be done after due consideration of facts and circumstances of the case and after examining the relevant documents submitted by the taxpayers. Needless to say, issuance of show cause notices recklessly will lead to unnecessary litigations in future.”

Section 73 of the GST Act deals with the determination of tax not paid, or short-paid, or erroneously refunded, or input tax credit wrongly availed or utilised for any reason other than fraud, or any wilful misstatement, or suppression of facts. Under this section, an officer shall issue the notice at least three months prior to the time limit specified for the issuance of an order. Earlier, the time limit for issuance of orders related to the recovery of tax not paid, short paid, or input tax credit wrongly availed or utilised for FY19 was March 31, 2024. However, on December 28, the Finance Ministry, through a notification, extended the timeline to April 30, 2024. This means the timeline for the issuance of SCNs also gets extended by one month, i.e., January 31, 2024. Similarly, for FY20, the due date for issuance of SCNs extended by two months, and now it will be April 30.

“The Chief Commissioners of the Zones are advised to keep a close watch on the number of pending investigations, scrutiny, etc., to ensure that the officers under their supervision are working in a methodical manner,” Agrawal said. It may be noted that the extended deadlines mentioned above apply specifically to time-barring periods under Section 73. The GST department will still have an additional two years to issue notices and orders under suppression or misrepresentation cases under Section 74. It is expected that following a court ruling, the department might give businesses 15-30 days to reply to ensure that taxpayers have a reasonable opportunity to be heard.

Industry sources say that a large number of notices were issued just before the due date for the fiscal year 2017-18. Various reports suggest that in December itself, GST authorities issued demand notices totalling ₹1.45-lakh crore to around 1,500 businesses for inconsistencies in annual returns and input tax credit claims for the financial year 2018. Now, the expectation is that with advise from Chairman, the situation might not be as seen for last fiscal.

Legacy cases

The Chairman also highlighted the issue of legacy adjudication. He emphasised that nearly 1 lakh legacy cases involving over ₹29,000 crore, need to be adjudicated quickly as it has been more than 6 years since the rollout of GST. “With the promotion of 2,398 officers from Group ‘B’ to Group ‘A’ level, there has been a substantial increase in manpower at the level of adjudicating officers. The increase strength should also translate into faster liquidation of pendency,” he advised.

According to Rajat Mohan, Executive Director of Moore Singhi, in situations where tax officers rapidly issue notices to meet deadlines, such as the extended deadline for FY19 in January 2024, it risks compromising the quality and fairness of tax assessments. “This approach can lead to errors, unnecessary disputes, and undermine taxpayer rights. It highlights the need for more efficient processes, better tax administration, and policy changes to ensure accurate, fair tax collection,” he said.

Experts advise that taxpayers should carefully review such notices and consult professionals if needed, while authorities should focus on balancing procedural efficiency with accuracy and fairness in their assessments. “In recent days, there has been a noticeable increase in the eagerness of field officers to swiftly conclude tax cases and issue notices, frequently overlooking the basic principles of natural justice. Many of these officers are taking extreme measures, compelling taxpayers to settle tax payments on questionable grounds or facing the threat of having their cases escalated to the intelligence unit for alleged non-cooperation. This approach not only disregards the essential norms of procedural fairness but also places undue pressure on taxpayers, coercing them into making unwarranted payments under the menace of increased scrutiny,” Mohan said.

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