‘Don’t summon CEOs in first instance’: CBIC’s 10 commandments to GST officials

NEW DELHI: In a major move to check overreach by taxmen, the Central Board of Indirect Taxes & Customs (CBIC) has directed Goods and Services Tax (GST) officials to make judicious use of its power to issue summons and to not call top company officials such as chairman or chief executive officers (CEOs) in the first instance when tax department of the firm is able to resolve the matter.“While issuing of summons is one of the instruments with the department to get/obtain information or documents or statement from any person to find out the evasion of the tax etc, however, it needs to be ensured that exercise of such power is done judiciously and with due consideration,” the GST-Investigation Wing of CBIC on August 17 said.“Officers are also advised to explore instances when instead of resorting to summons, a letter for requisition of information may suffice”, the 10-point guidelines on use of power of summons by officials said. It noted that CBIC earlier sensitised officers regarding the use of their power of summons in respect of legacy laws. “However, Board finds it necessary to issue fresh guidelines under CGST [Central GST],” it added.According to the guidelines, a senior officer must in writing sanction issuance of summons by a superintendent, there must be a full record of the entire procedure, and summons must mention specific names of the persons and details of the offences.“Senior management officials such as CMD/ MD/ CEO/ CFO similar officers of any company or a PSU [public sector undertaking] should not generally be issued summons in the first instance. They should be summoned when there are clear indications in the investigation of their involvement in the decision-making process which led to loss of the revenue,” it said.It also instructed the summoning officer to be present at all times and dates for which summons are issued. “In case of any exigency, the summoned person must be informed in advance in writing or orally,” it added. It also reiterated a November 2019 decision that mandated officers to generate a document identification number (DIN) for every communication with taxpayers to ensure transparency and accountability.In another circular issued on Thursday, CBIC cited a Supreme Court verdict of August 16, 2021 to advise GST officials to not arrest people as a matter of routine. “Approval to arrest should be granted only where intend to evade tax or commit acts leading to availment or utilisation of wrongful Input Tax Credit [ITC] or fraudulent refund of tax or failure to pay amount collected” as specified in the CGST ACT,” the order said.Abhishek Jain, partner-Indirect Tax at KPMG in India, said: “In various instances summons were issued to CXOs for routine matters, which, otherwise could have been addressed by the tax department of the company. The guidelines reinstate the principle that CXOs should not be summoned at the first instance. Furthermore, the guidelines provide that DIN should be mentioned in the summons which will enable easy tracking for the summons.”According to Saurabh Agarwal, Tax Partner at consultancy firm EY, various high courts held that provisions of arrest should be invoked rarely and not to be exercised arbitrarily or for sake of recovery. “The instruction clarifies that power to arrest should be invoked in exceptional circumstances such as where person is involved in tampering the documents, fraudulent activities etc. Power of arrest should not be invoked for routine or technical matters,” he said.“These guidelines have come in light of accepted legal principles and the Apex court’s ruling that if arrest is made in routine and without exercising due caution, it can cause incalculable harm to the self-esteem and reputation of the person. The GST officers should take due note of these guidelines and follow the principles and procedures provided therein. Also, the taxpayers should peruse these guidelines to understand their rights,” Jain added.On instructions related to issuing summons, Agarwal said, these are in line with the past jurisprudence wherein high courts have multiple times held that summon should be issued as last resort. “The present circular lays down important pillars like reasons and approval for issuance of summon, procedure for issuance of summon, situations when summon should not be issued etc. The circular meets industry expectations by clarifying that summon should not be issued to demand statutory documents already available in online GST portal,” he added.