Unlike in criminal investigations, where the courts have been vested with the inherent powers to quash summons, the issue of summons in tax investigations has been ambiguous and has not been subjected to much judicial interpretation. A reason for that has been the general principle that investigations must not come within judicial scrutiny and the courts must exercise restraint while interfering in investigations.

Under the erstwhile indirect tax legislations (Central Excise Act, 1944 and the Customs Act, 1962) the power to issue summons by the revenue authority was derived from Section 14 and Section 108 respectively. A similar provision has been incorporated in the GST regime under S.70 of the CGST Act, 2017. The provisions give the power to the revenue officers to summon any person whose attendance he or she deems necessary, either to give evidence or to produce a document in an inquiry. On many occasions, officers of the assessee who had no connection to taxation or its management within the organisation, were summoned. Often it would be seen that senior officials of the assessee company, unconnected to those in-charge of tax administration, such as the CEO or the HR director, would be summoned and the same would not be withdrawn despite explanations being tendered by the assessee.

Even when such summons were challenged before the writ courts, the courts have been very reluctant to interfere as it is very difficult to determine whether the writ brings a genuine grievance or an excuse to stall investigation. The Central Board of Excise and Customs has always been aware of such issues. The Board, time and again, has issued circulars and instructions which mandated the revenue officers to exercise reason before issuing summons to top officials of companies. Though such instructions were binding on the revenue officials, they have not been able to curb the harassment which at times the assessee(s) faces during investigation.

There have been occasions when the representative of the assessee was threatened with detention and arrest if the concerned person does not report to the Commissionerate. The Board circulars, while providing summoning procedures both under the old legislations as well as under the GST, have not made furnishing of reasons for issuance of summons mandatory. The wordings are such that it gives enough scope to an officer to bypass reasons and directly issue summons. The inadequacy in protecting the liberties of the assessee has led to severe anxiety in their minds, and the revenue authority must understand that this fear gives bad name to India’s tax regime.

The present pandemic situation should be used as an opportunity by the Board to frame elaborate guidelines to buttress the tax procedures. While physical appearance is no longer the norm, the online appearance of the assessee and its officials will help in easing the apprehension of the assessee and will help officials complete their investigation effectively. Further, the Board must mandate that while calling top officials of an assessee company, the reasons for the same must be mentioned in the summons itself. The power to summon given to the revenue department and its officials must be used judiciously and discretion must be exercised keeping the investigation in mind. The power to summon cannot be used as a tool to harass or compel the assessee to make deposit of the disputed tax amounts.

To conclude, for a robust tax regime to exist, not only the substantive law, but the procedures, too, must be made seamless and healthy. If a healthy tax ecosystem needs to be built, the Board must address the issues of procedures which have till now gone unheeded.

Bhattacharya is Joint Partner and Kasturi is Senior Associate, Lakshmikumaran & Sridharan Attorneys

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