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Tax Vista Your weekly tax recap Edn. 190 - 5th Feb. 2024 By Dr. G. Gokul Kishore |
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GST investigations - No rule requiring sharing copy of search warrant
Search warrant used to enter premises and conduct search and seizure operations by DGGI officers or GST authorities need not shared i.e., copy of such warrant is not required to be given to the taxpayer. It is sufficient that the warrant is shown to the taxpayer, as per Odisha High Court because there is no strict rule that copies of search warrant ought to be given to persons occupying the premises during the search. The taxpayer filed writ petition in the High Court assailing rejection of request for copy of search warrant and order sheet / note sheet relating to inspection by DGGI. In this case, show cause notices were later issued and for filing reply, such copies were sought. According to the department, the documents sought were internal office documents and the case had not attained finality.
The High Court held that process of investigation in tax evasion cases is not over on issuance of show cause notice but only after determination of the quantum or absence of evasion, by order passed after adjudication. Prosecution may also be launched and the person would gain unfair advantage if note sheet is disclosed. The Court said that note sheet may contain information about source of information or about third party against whom investigation is pending and disclosure would jeopardize the same [2024-VIL-86-ORI].
It is the decades-old practice of indirect tax department to obtain signature of having seen copy of panchnama / mahazar or other documents. Generally, copy of statement is also mentioned as having provided with taxpayer's signature though the same is never provided. While note sheet in a file is an internal document and may contain sensitive information and therefore, cannot be shared, not sharing copy of warrant or statements only manifests lack of transparency and fairness in conducting investigations. There may not be any statutory compulsion but a progressive tax administration should be candid and should share those documents which belong to the taxpayer - a search warrant breaches privacy and rights of the taxpayer and statement stated as voluntary is mostly coerced.
Rectification of GSTR-1 in cases of inadvertent error, permissible
When GST was introduced, taxpayers were advised to review or draft contracts / agreements to the effect that if there is a loss of input tax credit due to omission or fault of supplier, then the same would be recoverable by the recipient from such supplier. CGST Act casts onus on supplier to comply with certain requirements having impact on the ITC admissibility of the recipient. One of the issues seen widely is inadvertent non-reporting of some of the invoices by suppliers resulting in non-reflection in GSTR-2A and therefore, payment not being released by buyer-recipient citing ITC loss. A similar case was argued before Bombay High Court recently and the taxpayer relied on precedent order of the same court wherein if there is no revenue loss to government, errors in returns can be permitted to be rectified. The Court directed the taxpayer to file rectification application to rectify GSTR-1 to be filed manually or online [2024-VIL-90-BOM]. May be, because the GST system is online-based and inter-twined, such rectification has become cumbersome as otherwise, correcting an entry in a return or document already submitted should not be a challenge. All returns under GST should have rectification or revision facility and it appears the same is under contemplation.
Appellate order passed without opportunity to assessee to defend itself, not valid
While the assessee's business - bakery also serving food to customers besides providing facilities like custom made cakes, party items, take away etc., was made of flour and spice and everything nice, the order of Appellate Authority for Advance Ruling (AAAR) ensured that the proceedings seeking classification was short, violating principles of natural justice. The AAR had held that the business was that of restaurant and reliance was placed on Circular bearing No. 164/20/2021-GST dated 06.10.2021 for the definition of restaurant. On appeal by the department against the order, it appears that the premises of the assessee was inspected. The assessee assailed the order of the AAAR contending that the said report was never provided to them which was accepted. The other contention was that the decision was flawed in as much as the definition of "restaurant" as provided in the Circular was not used. The High Court held that when an adverse material is used against the assessee, they should have been provided adequate opportunity to confront the same. The other argument of the assessee was that at the time of inspection October 2021, the restrictions on in-restaurant dining in view of Covid-19 were in vogue and the finding of the inspection team that food was not being served to customers could not be used to conclude that the business of the assessee was only sale of baked products (goods) and no service was being carried out. The matter was remanded for passing of fresh order [2024-VIL-92-ORI].
SCN issued under Section 74 without mentioning suppression, is valid
The petitioner assailed the SCN issued to him on two counts - issuance under Section 74 of the CGST Act without mentioning/substantiating suppression and not mentioning reason for issuance of notice. As per the extract of SCN it appears that the issue pertained to irregular availment of transitional credit. The High Court held that since reason had been mentioned, there was no case to quash the assessment proceedings itself. On facts, the notice had been issued within the period of limitation for Section 73 of the CGST Act, the High Court held that mere mention of a provision would not be determinative of the notice under that section and though the SCN mentioned Section 74 the contention of the assessee that extended period had been wrongly invoked was not acceptable. The order speaks about notice to be treated as issued under Section 73 as time-limit was available under such provision. The Court also points to the importance of contents of the notice. This order may be perceived as against the settled principles when the department issues SCN under a provision involving intent to evade as the onus is heavy and it must be discharged by the department with evidence and such evidence varies from a normal case as against a case on evasion [2024-VIL-100-AP].
Shipping bill not uploaded at time of refund claim - Inadvertent error cannot negate claim
The petitioner did not upload shipping bills at time of filing refund claim and was not permitted to amend GSTR-1 subsequently. Refund claims were rejected and hard copies of shipping bills filed with appellate authority were not considered. The High court opined that law should not be so rigid so as not to permit the claimant to rectify the mistake that has been committed inadvertently. Since there was no other ground to reject refund and taking into account the fact that there was no deliberate non-compliance, the High Court directed the tax authorities to consider the hard copy of shipping bills filed as well as permit amendment of GSTR-1. It did not accept the argument of the authorities that amendment could not permitted stating that authorities ought to have the power to remove difficulties in case a taxpayer intends to avail the benefit as mandated in law [2024-VIL-93-CAL].
Provisional assessment not finalised in time - High Court orders release of goods
The goods of the petitioner who regularly imported from Sri Lanka, were detained and provisionally assessed (within one day) denying exemption of duty since the officer did not accept the Certificate of Origin. Deposit of 100% of duty amounting to over INR 1 crore was made a condition for release of the goods. The petitioner repeatedly sought to know the reason for demand of duty but did not receive response. He also approached the High Court but was asked to avail remedy of appeal as per the order by the Single Judge Bench. Before the Division Bench, the department attributed delay in final assessment/provisional release to the verification process in which they were engaged. However, the request for verification had been given only two months after the provisional assessment. The High Court held that release or goods/assessment cannot be delayed inordinately. Since the petitioner was a regular importer the said danger of exemption being not eligible due to COO not being authentic was not such as to require 100% duty deposit and that goods were to be released on payment of IGST and a bank guarantee for 20% of the differential customs duty demanded. It also directed that assessment be finalised within 3 months. Despite Section 28DA of Customs Act and CAROTAR providing for guidelines, they are not complied with by the authorities resulting in undue delay and loss of business for the importers. Adding insult to injury is demand of huge amounts before release and refusal to accept bond or BG [2024-VIL-102-KER-CU].
(The author is an Advocate, Gokul & Subha Advocates, Chennai. The views expressed are personal. The author has published books on cross-border taxation and investigations & appeals under GST. He edits R.K. Jain's GST Law Manual. E-mail - gokulkishore@gmail.com)