CBIC instructs no coercive action during search and seizure for recovery of dues

The Central Board of Indirect Taxes and Custom (CBIC) has instructed that no coercive action be taken against Goods & Services Tax (GST) assessees during search and seizure for recovery of dues. It also said that if it happens, then disciplinary action may be taken against the tax official.

The GST investigation wing, under the CBIC, has issued a detailed investigation explaining the dos and don’ts. This has been done after noticing of some instances where some of the taxpayers, after voluntarily depositing GST liability, have alleged use of force and coercion by the officers for making recovery during the course of search or investigation. Some of the taxpayers have also approached High Courts in this regard.

The instruction clarified that there may not be any circumstance necessitating ‘recovery’ of tax dues during the course of search orinvestigation proceedings. However, there is also no bar on the taxpayers for voluntarily making the payments on the basis of ascertainment of their liability on non-payment/ short payment of taxes before or at any stage of such proceedings. “The tax officer should, however, inform the taxpayers regarding the provisions of voluntary tax payments through DRC-03,” it said.

The instruction has also advised supervisory authority such as Principal Chief Commissioner or Chief Commissioner in a zone saying “in case, any complaint is received from a taxpayer regarding use of force or coercion by any of their officers for getting the amount deposited during search or inspection or investigation, the same may be enquired at the earliest and in case of any wrongdoing on the part of any tax officer, strict disciplinary action as per law may be taken against the defaulting officers”.

“These are very welcome instructions and will give fair opportunity and enhance fair process of adjudication. As it is clearly provided that strict disciplinary action will be taken, it is hoped that during investigation the taxpayers are not forced to pay as voluntary tax payments,” said Abhishek A Rastogi, partner at Khaitan and Co, who argued several such writ petitions against coercive recoveries taken by the tax authorities, in which orders have been passed by several courts to give due benefit to the taxpayers.

According to the board, a taxpayer has an option to deposit the tax voluntarily by way of submitting DRC-03 on GST portal. Such voluntary payments are initiated only by the taxpayer by logging into the GST portal using its login ID and password. Voluntary payment of tax before issuance of show cause notice is permissible. This helps the taxpayers in discharging their admitted liability, self-ascertained or as ascertained by the tax officer, without having to bear the burden of interest for delayed payment of tax and may also save him from higher penalty imposable on him subsequent to issuance of show cause notice.

“There may not arise any situation where recovery of the tax dues has to be made by the tax officer from the taxpayer during the course of search, inspection or investigation, on account of any issue detected during such proceedings. However, the law does not bar the taxpayer from voluntarily making payment of any tax liability,” the instruction said.

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