GST UPDATE No 158 ON HIGH COURT DIRECTIONS ON ISSUANCE OF SUMMON

With the passage of time, adversities and complexities in GST Laws have increased manifold. The tax authorities are having an approach to collect tax aggressively from the taxpayers either by hook or crook. In doing so, they issue summons and gather information which is the first step towards initiation of proceedings under GST Law. Furthermore, the industries and business houses are of the view that this exercise results in harassment by the officers and taking harsh actions against them thus, adversely impacting working capital and other operations of the businesses. Recently, issuance of summon was challenged before Hon’ble Bombay High Court in the case of F.S.M. EDUCATION PVT. LTD. The analysis of the decision is the subject matter of discussion of our present update. The petitioner is a music school engaged in the business of recreational activities such as imparting training in music to the students. The petitioner was requested to submit certain documents within the prescribed time which was duly submitted by them as well. Later on, summon was issued to the petitioner company without providing any details of the inquiry. The petitioner was interrogated and crossquestioned continuously thus, violating the guidelines issued in the said matter. The Counsel of the petitioner argued that as per FAQs of 34 questions issued by GST department dated 15.12.2018 indicates that the summon can be issued only as a last resort to obtain details. It should not be issued in a casual manner. Further, the summons cannot be issued to pressurize or coerce the petitioner. The court held that all the submissions made by the Counsel of the petitioner are correct. The department should inform the list of documents to be furnished by the petitioner on which clarification is required by the department. Reliance was placed on the FAQs dated 15.12.2018 thereby holding that the discretion of issuing summon should be exercised as last resort and details required should be obtained by way of ordinary letter, as far as possible. Furthermore, the petitioner was also cooperating and furnishing the documents within the prescribed time. Accordingly, the Court disposed of the Writ Petition and issued directions to the department that summon shall be issued only in the event where revenue authorities are not satisfied with the documents and response of the consultant of the petitioner. Moreover, if any summons are being issued by the revenue authorities, the same shall indicate the purpose of issuance of summon with seven days notice before fixing the date for recording the statement of the director. Issuing of summon is a crucial power which helps the department to get information to find out evasion of tax so it should be exercised cautiously. However, in the present scenario, it is being used as a sword against the taxpayer. The above matter is prone to litigations not only in GST but also in erstwhile indirect tax regime thus, leading to “tax terrorism”. The CBIC has also issued guidelines regarding issuance of summons in Central Excise and Service Tax matters vide Circular No. 207/07/2014-CX-6 dated 20.01.2015 which act as a shield for the taxpayers thus mitigating the adversities which is caused to the taxpayers on issuance of summons. It is worth mentioning that clarifications issued by the Board are binding on the departmental officers in view of the Apex Court decision given in the case of COLLECTOR OF CENTRAL EXCISE, VADODARA VS DHIREN CHEMICAL INDUSTRIES [2002 (139) ELT 3 (SC)]. Hence, the revenue authorities are bound to exercise due diligence while issuing summon to the assessee otherwise it leads to unnecessary harassment of the assessees.

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GST UPDATE No 158 ON HIGH COURT DIRECTIONS ON ISSUANCE OF SUMMON

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