Taxpayers need to be conscious while making any statements before the GST officers as these can form the basis for issuing notices or taking any action punitive against them.
With passage of time the complexities of GST have only increased and so has the aggression of the tax authorities to recover taxes from the taxpayers. Lately, many companies, their employees and key managerial persons have been receiving summons for some or the other matter. Under GST law, section 70 of the CGST Act, 2017 empowers the GST officers to summon any person to appear before them, if the same is necessary in the course of an inquiry to record statements or produce any documents. Such persons summoned by the GST officers are duty bound to appear before the officers. It is worth noting that the summons and information gathered thereafter is the first step towards proceedings under GST law. Therefore, it becomes imperative for the taxpayers to know how to deal with such summons and be aware of their rights and duties.
Know your officers
Most importantly the taxpayers should know if the officers issuing such summons is a proper officer or not as per the GST law. The officers of audit wing do not have powers to issue the summons but DGGI has been given very wide powers in the form of all India jurisdiction to exercise this power. Any summon issued by the officers not empowered under the law can be challenged by the taxpayers.
Duties of a taxpayer
Summon proceedings are equivalent to ‘judicial proceedings’ as under the Indian Penal Code. Hence, the taxpayers should be cautious while dealing with the tax officers. During the summons proceedings, GST officers may call upon the documents and record statements of the employees/directors/key managerial persons of the Company.
Firstly, while making any statements or submitting any documents, the taxpayers should know the consequences of such submissions. Unlike in case of police officers, the statements made before the GST officers are admissible as evidence against the taxpayer. The issue is no more res integra as this position has been addressed by the Supreme Court in case of the customs officers wherein it was held that customs officers do not constitute police officers even if they may have specific powers and hence any statement made before the customs officers will be admissible as evidence.
The issue also came up under GST law before the Telangana High Court wherein it has been held that GST officers are not police officers for the purpose of Indian Evidence Act and thus, any statements made before them would have evidentiary value. Therefore, the taxpayers need to be conscious while making any statements before the GST officers as these can form the basis for issuing notices or taking any action punitive against them.
Next, it is important that taxpayers give their answers in the truest manner and to the best of their knowledge. Providing false statements tantamount to an offence under the Indian Penal Code. Thus, in order to safeguard themselves from such eventualities, it will be in the best interest of the taxpayers to provide all the information/replies asked by the tax officers accurately without any deliberate suppression on their end.
After discussing the duties in case of summon proceedings, the taxpayers should also be aware of their rights which will protect the interest at various stages of such proceedings.
Rights available to a taxpayer
Most of the time, it has been seen that the department causes undue harassment to the bona fide taxpayers. Hence, it is of utmost importance that the taxpayers must be aware of their rights that can be exercised by them to safeguard themselves from any unilateral action on part of the tax authorities. To begin with, the taxpayers must be aware that CBIC has issued detailed guidelines for regulating summon proceedings which inter-alia provides that summons should only be used as a last resort where taxpayer is not cooperating, should only be issued against senior management if investigation indicates their involvement and not at first instance, should not be issued for appearance at odd hours, statements must be recorded during official hours etc. These guidelines clearly provide that language used in summons should not be unnecessarily harsh to cause stress or embarrassment to the taxpayer and should provide the justification of its issuance.
Apart from knowing these guidelines, taxpayers should also be aware of the following rights which can be exercised by them during the summon proceedings:
- Right of retraction: Tax officers often put undue pressure on taxpayers as a result of which they are forced to make inaccurate statements. In such a situation, taxpayers have the right to retract the earlier incorrect statement recorded during the summon proceedings and substitute the same with the correct statement. This will safeguard the taxpayers from any adverse action being taken by the tax authorities based on such incorrect statements.
- Right to remain silent: In case, a taxpayer does not know the answer to any question posed or is not sure of the answer, he may exercise this right and remain silent. It is to be noted that the said right is a constitutional right available to the taxpayer and will not be considered as an offence or causing obstruction to the proceedings as affirmed by the Supreme Court and High Courts in various judgments.
- Right to cross-examine: Tax authorities sometimes tend to manipulate the summoned person by giving reference to the adverse statement given by any third person who can be his colleague, vendor/dealers of the company, etc. In such a situation, the taxpayer need not concede to such statements made by any third person and can exercise his right of cross-examining the other person to verify the adverse statements made by him.
By appreciating the duties and recognizing the rights, a taxpayer can mitigate any adversities which may be caused to them by issuance of summons and not succumb to any pressure imposed by the authorities. Thus, it is imperative that a taxpayer is diligent and mindful of the foregoing rights and duties.
(Tushar Aggarwal is Founder Partner, Tattvam Advisors and Geetika Shrivastava is Executive Partner, Tattvam Advisors)