Power to Summon under GST: Detailed analysis by Adv. Sunil Keshvani

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Adv. Sunil Keshvani

Detailed Analysis of Section 70 of CGST Act, 2017 – Power to Summon persons to give evidence and produce documents

Introduction

A Summon is a call by court or any administrative body of government in written to an individual to appear in court or concerned office in person at a specified time and place regarding any investigation or enquiry on any matter or case. To summon is to order to meet, to bring together or to order to come. It is a document issued by a court ordering a specific person to appear at a specific time for some specific purpose. It is issued either directly to the person or to a law officer who must carry out the instructions. Dictionary synonyms of summon are to call, cite, convene, convoke, muster. Summon implies exercise of authority over someone to call and appear at a specific time for a specific purpose.

The summons should not be vague but it should be specific and clear in its terms regarding information such as the title of the Court, the place at which, the day and time of the day when the attendance of the person summoned are required.

A summon may be issued in both criminal and in civil cases.

Why it is issued?

A summon is usually served when legal action is taken against an individual, or a person is required to appear before a court as a witness in a proceeding. This document ensures that the person is called upon and his presence on the given date of the hearing.

Types of Summons:

A Civil Summons is a judicial summons given by one private person or entity to another private person or entity to appear in court and respond to a petition filed in court for suits relating to damages for breach of any contract, claim of compensation for a loss or injunction to force someone to do or not to do something, any infringement etc.
A Criminal Summons is a type of judicial summons notifying someone to appear in a criminal court for involvement in a criminal act punishable under the Indian Penal Code. These are general issued through police. Eg. Trespassing, Armed robbery, Assault, Murder etc
A Citation Summons is a notice to appear before a criminal court for a relatively minor charge eg. drink and drive. Generally this type of summons is delivered by the police directly on the spot of such violation.
A Traffic Summons is issued by the police for traffic violations. Eg. if you are caught for reckless driving, driving under the influence of alcohol or drugs, you will receive a traffic summons which in reality is a criminal summons as these violations are often criminal in nature. A traffic summons may not necessarily be for a severe criminal violation but a violation requiring you to appear in court and respond to the allegations against you. Some other traffic violations do not lead to the issuance of a traffic summons such as parking tickets. In these cases, you get a ticket without being called to the court.
An Administrative Summons is another type of judicial summons issued by an administrative body authorized in law to handle a specific type of investigation or legal matters. For example, every jurisdiction will have a tax authority in charge of handling all matters related to taxes. Your tax authority may have the power to issue a summons for you to appear and provide information related to your taxes.

Administrative summons can be issued by different types of administrative courts such as:

Tax court
Immigration court
Labour court
Professional code

The discussion in today’s article is restricted to the provisions relating to power to issue summons under CGST Act, 2017

The Statutory Provision

Section 70 of the CGST Act, 2017 contains the provision with regard to the issuance of summons. The same reads as under:

Section 70 Power to summon persons to give evidence and produce documents:

(1) The proper officer under this Act shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908.

(2) Every such inquiry referred to in sub-section (1) shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code.

Position in the other & earlier regimes

The provision relating to issuance of summons are found in Customs and also in earlier now subsumed tax regimes be it Excise, Service Tax or State VAT. A basic comparison is depicted in below mentioned table:

Particulars	GST	Customs	Excise / Service Tax
Relevant Section?	Section 70 of Central Goods and Services Tax Act, 2017	Section 108 of Customs Act, 1962	Section 14 of Central Excise Act, 1944
Officer who can summon?	The proper officer	Any Gazetted Officer of customs	Any Central Excise Officer duly empowered by the Central Government
Person who can be summoned?	any person whose attendance he considers necessary	any person whose attendance he (the officer) considers necessary	any person whose attendance he (the officer) considers necessary
Purpose for which summons can be issued?	either to give evidence or to produce a document or any other thing in any inquiry	either to give evidence or to produce a document or any other thing in any inquiry which such officer is making under this Act	either to give evidence or to produce a document or any other thing in any inquiry which such officer is making for any of the purposes of this Act
Duties cast upon the person summoned?	All persons so summoned shall be bound to attend, either in person or by an authorized agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required	All persons so summoned shall be bound to attend either in person or by an authorised agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and produce such documents and other things as may be required	All persons so summoned shall be bound to attend, either in person or by an authorized agent, as such officer may direct; and all persons so summoned shall be bound to state the truth upon any subject respecting which they are examined or make statements and to produce such documents and other things as may be required
Inquiry Status?	Every such inquiry referred to in subsection (1) shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code	Every such inquiry referred to in subsection (1) shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code	Every such inquiry referred to in subsection (1) shall be deemed to be a “judicial proceedings” within the meaning of section 193 and section 228 of the Indian Penal Code

Detailed Analysis

Section 70 of the CGST Act, 2017 deals with exercise of powers to issue summons for giving evidence and for production of documents or any other thing. In any inquiry which the proper officer is making for any of the purposes of this Act, he shall have the power to summon:

any person, whose attendance is considered necessary
either to give evidence or to produce a document or any other thing
in any inquiry in the same manner as provided in the case of a civil court under the

provisions of the Code of Civil Procedure, 1908.

Let us now analyze various intricacies in and around Section 70 of the CGST Act, 2017.

Meaning of Proper Officer

Section 2(91) of the CGST Act, 2017 defines Proper Officer as follows: “proper officer” in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board.

Vide Entry 4 of Circular 3/3/2017 dated 05.07.2017, CBIC had assigned ‘Superintendent of Central Tax’ as the proper officer for the purpose of section 70. CBIC vide entry 8 of Notification 14/2017 Central Tax dated 01.07.2017 appointed Senior Intelligence Officer, GST Intelligence or Superintendent, GST Audit and vests them with power that of a Superintendent.

A close scrutiny of section 70 of the CGST Act, 2017 would reflect that the provision uses the word ‘The’ before the words ‘proper officer’. It means that it is the specific officer who has been assigned jurisdiction either on the basis of territory, function or category, and only he has the authority to issue summon under the said section.

Summons Vs. Notices

Loosely one can safely say that all summons are notices, but all notices are not summons. As discussed above, a summon is an official call upon or invitation to mark your presence at the court or before an officer. However, notice is general information from the court / authority. Notice may or may not result in a summon. As per CGST ACT, a summon shall be deemed to be a “legal proceeding” under provisions of section 193 and the section 228 of the Indian Penal Code (45 of 1860). On the contrary, the same doesn’t apply to the notice.

Inquiry

The primary condition before issuance of the summon is that an inquiry has already been initiated. In relation to the said inquiry the proper officer requires the person either to give evidence or to produce a document or any other thing. The matter connecting to the inquiry shall have to be explained in the summon issued. If it is not explained, summon issued may be invalid. The Circular No. 128/2019 dated 23-12-2019 provides the format of ‘Summon’. It is ample clear that provisions of section 70 have been enacted for collecting evidences and materials to frame or proceed the case against the person concern. Before proceedings or framing a case, the proper office shall have to compute the liability of tax, interest and penalty which is mandate under the GST Law.

The Proper Officer has power to issue summons in an Inquiry. However he is not empowered under section 70 to retain the documents for which summon were issued. It has been held in T.T.V. Dinkaran v. Enforcement Officer, (1995) 80 E.L.T. 745 that where the summon did not mention the nature of investigation therein, it will still be valid since mentioning the details about investigation may alert the person concerned to manipulate his record.

Importance of Inquiry

The actions of the Proper Officer depends upon the inquiry he makes invoking the provision of Section 70 of the CGST Act, 2017. Be it

(1) Requirement to issue a statement containing the details of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilised u/s. 73 and 74 in form DRC-01 or

(2) Requirement of informing the grounds of arrest u/s. 69(2) for offences enumerated u/s. 132 or

(3) For a reason to believe before initiating Inspection, Search and Seizure u/s. 67 etc.

Inquiry Vs. Enquiry

There is substantial difference which needs to be acknowledged between Inquiry and Enquiry. Section 70 refers to Inquiry. An “Inquiry” means investigation while “enquiry” connotes information seeking of general nature.

Inquiry Vs. Proceedings

Section 70 uses the expression ‘in any inquiry’. Now the question is can the Proper Officer initiate summon in case of pendency of any proceeding against a person who may not be the same person to whom summon has been issued. Can ‘inquiry’ be equated with ‘proceeding’?

The words “proceedings” and “inquiry” have not been defined in CGST Act. Therefore, these words have to be interpreted in the context of the aforesaid Acts. The word “inquiry” in Section 70 has a special connotation and a specific purpose to summon any person whose attendance may be considered necessary by the proper officer either to give evidence or to produce a document or any other thing. It cannot be intermixed with some statutory steps which may precede or may ensue upon the making of the inquiry or conclusion of inquiry.

The process of inquiry under Section 70 is specific and unified by the very purpose for which provisions of Chapter XIV of the Act confers power upon the proper officer (PO) to hold inquiry. The word “inquiry” in Section 70 is not synonymous with the word “proceedings” in section 6(2)(b) of the CGST Act.

The Hon’ble Allahabad High Court in G. K. Trading Company v. Union of India & Ors. [Writ Tax No. 666 of 2020, dated December 2, 2020] has held that inquiry cannot be equated with proceeding. Meaning thereby, summon can be initiated even if there is pending proceeding against the assessee.

Summon Vs. Warrant

A summons is an officially issued document that is released by any Court on an individual or an entity who may be involved in a legal proceeding. A summon is usually served when legal action is taken against an individual, or a person is required to appear before a court as a witness in a proceeding. This document ensures that the person is called upon and his presence on the given date of the hearing.

On the other hand, a warrant is issued to apprehend an individual committing a particular offence(s).

Judicial Proceeding within the meaning of section 193 and section 228 of the Indian Penal Code.

Every such inquiry referred to in sub-section (1) shall be deemed to be a “judicial proceeding” within the meaning of section 193 and section 228 of the Indian Penal Code.

Section 193 and Section 228 are enshrined in Chapter XI (of False Evidence and Offences against Public Justice). The same are as under:

Section 193 of the Indian Penal Code says, “Whoever intentionally gives false evidence in any of a judicial proceeding, or fabricates false evidence for the purpose of being used in any stage of a judicial proceeding, shall be punished with imprisonment of either description for a term which may extend to seven years, and shall also be liable to fine;”

Explanation 1: A trial before a Court-martial; is a judicial proceeding.

Explanation 2: An investigation directed by law preliminary to a proceeding before a Court of Justice, is a stage of a judicial proceeding, though that investigation may not take place before a Court of Justice.

Illustration

A, in an enquiry before a Magistrate for the purpose of ascertaining whether sought to be committed for trial, makes on oath a statement which he knows to be false. As this enquiry is a stage of a judicial proceeding, A has given false evidence.

Explanation 3: An investigation directed by a Court of Justice according to law, and conducted under the authority of a Court of Justice, is a stage of a judicial proceeding, though that investigation may not take place before a Court of Justice.

Illustration

A, in any enquiry before an officer deputed by a Court of Justice to ascertain on the spot the boundaries of land, makes on oath a statement which he knows to be false. As this enquiry is a stage of a judicial proceeding. A has given false evidence.

Section 228 stipulates, “Whoever intentionally offers any insult, or causes any interruption to any public servant, while such public servant is sitting in any stage of a judicial proceeding, shall be punished with simple imprisonment for a term which may extend to six months, or with fine which may extend to one thousand rupees, or with both.”

So, the GST Officer is similar to a Civil Court in his power to summon and his inquiry is deemed to be “judicial proceedings” only for false evidence and intentional insult.

Article 20(3) of the Constitution of India

Before accepting the summons and making statement in response to the summons, it is advisable to aware of the important provisions governing the same. Article 20(3) of the Constitution prohibits a person being made to be witness against himself. Therefore, avoidance of service of summons is unlawful but abstinence from making statements is not. Understanding the legality of these matters will be of significance in attending to such matters of inquiry before a judicial officer.

Section 136 of CGST Act, 2017 – Relevancy of statements under certain circumstances

A statement made and signed by a person on appearance in response to any summons issued under section 70 during the course of any inquiry or proceedings under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,––

(a) when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circumstances of the case, the court considers unreasonable; or

(b) when the person who made the statement is examined as a witness in the case before the court and the court is of the opinion that, having regard to the circumstances of the case, the statement should be admitted in evidence in the interest of justice.

Provisions of Indian Evidence Act, 1872

It is important to understand the provisions and available jurisprudence on the manner of gathering evidence, as enshrined in sections 24 to 30 of Indian Evidence Act, 1872. The person making the statement needs to establish that such statement was made under certain circumstances and that it is not to be relied upon in further proceedings. Statements made that are considered not reliable by the person making it, must lead evidence to support the assertion. It is permissible to presume statements are reliable unless withdrawn at the earliest opportunity in the remainder of the proceedings. Statements recorded under section 70 alone cannot form reliable evidence to support demand for tax in a show cause notice.

Relevant Sections of The Code of Civil Procedure, 1908

Section 27 – Summons to defendants—

Where a suit has been duly instituted, a summons may be issued to the defendant to appear and answer the claim and may be served in manner prescribed.

Section 28 – Service of summons where defendant resides in another State—

(1) A summons may be sent for service in another State to such Court and in such manner as may be prescribed by rules in force in that State.

(2) The Court to which such summons is sent shall, upon receipt thereof, proceed as if it had been issued by such Court and shall then return the summons to the Court of issue together with the record (if any) of its proceedings with regard thereto.

(3) Where the language of the summons sent for service in another State is different from the language of the record referred to in sub-section (2), a translation of the record,—

(a) in Hindi, where the language of the Court issuing the summons is Hindi, or

(b) in Hindi or English where the language of such record is other than Hindi or English,

shall also be sent together with the record sent under that sub-section.

Consequences of non-appearance to summons

The proceeding before the official who has issued summons is deemed to be a judicial proceeding. If a person does not appear when summoned without any reasonable justification, he can be prosecuted under Section 174 of the Indian Penal Code (IPC). If he absconds to avoid service of summons, he can be prosecuted under Section 172 of the IPC and in case he does not produce the documents or electronic records required to be produced, he can be prosecuted under Section 175 of the IPC.

Further, in case he gives false evidence, he can be prosecuted under Section 193 of the IPC. In addition, if a person does not appear before a CGST/SGST officer who has issued the summon, he is liable to a penalty upto Rs. 25,000 under Section 122(3)(d) of the CGST Act, 2017.

Guidelines for issue of summons: [Source: CBIC FAQ’s and F. No. 207/07/2014-CX-6 dated January 20, 2015]

The CBIC in the Department of Revenue, Ministry of Finance has issued guidelines from time to time to ensure that summons provisions are not misused in the field. Some of the important highlights of these guidelines are given below:

Summon is to be issued as a last resort where assesses are not co-operating and this section should not be used for the top management;
The language of the summons should not be harsh and legal which causes unnecessary mental stress and embarrassment to the receiver;
Summons by Superintendents should be issued after obtaining prior written permission from an officer not below the rank of Assistant Commissioner with the reasons for issuance of summons to be recorded in writing;
Where for operational reasons, it is not possible to obtain such prior written permission, oral / telephonic permission from such officer must be obtained and the same should be reduced to writing and intimated to the officer according such permission at the earliest opportunity;
In all cases, where summons is issued, the officer issuing summons should submit a report or should record a brief of the proceedings in the case file and submit the same to the officer who had authorized the issuance of summons;
Senior management officials such as CEO, CFO, General Managers of a large company or a Public Sector Undertaking should not generally be issued summons at the first instance. They should be summoned only when there are indications in the investigation of their involvement in the decision-making process which led to loss of revenue.

Precautions to be observed while issuing summons [Source: CBIC FAQ’s]

The following precautions should generally be observed when summoning a person:

A summon should not be issued for appearance where it is not justified. The power to summon can be exercised only when there is an inquiry being undertaken and the attendance of the person is considered necessary.
Normally, summons should not be issued repeatedly. As far as practicable, the statement of the accused or witness should be recorded in minimum number of appearances.
Respect the time of appearance given in the summons. No person should be made to wait for long hours before his statement is recorded except when it has been decided very consciously as a matter of strategy.
Preferably, statements should be recorded during office hours; however, an exception could be made regarding time and place of recording statement having regard to the facts in the case.

Some Judicial Pronouncements relating to Summons

Mentioned hereinbelow are some important judicial decisions under the GST regime as well as some under the earlier tax regime, which are relevant.

Who is Proper Officer

The Gujarat High Court in Yasho Industries Ltd. v. Union of India [2021] 127 taxmann.com 781 (Guj.) has held that under section 70 proper officer has power to summon any person whose attendance he considers necessary either to give evidence or to produce documents in any inquiry. ‘Proper officer’ in relation to any function to be performed under CGST Act means Commissioner or Officer of Central Tax, who is assigned that function by Commissioner in Central Board of Excise and Customs (CBIC).

Respondent in the given case was an officer of Directorate General of Goods and Services Tax Intelligence (DGGI) holding designation of Senior Intelligence Officer, who was appointed as Central Tax Officer with all powers under CGST Act and IGST Act and Rules made thereunder, as are exercisable by Central Tax Officers of corresponding rank of Superintendent as specified in CBEC Notification No. 14 of 2017- Central Tax dated 1-7-2017. Further, respondent being officer of Central Tax and Superintendent under CGST Act was also assigned powers of proper officer by Board vide Circular dated 5-7-2017.

Therefore, respondent, officer of DGGI was proper officer in relation to function to be performed under CGST Act as contemplated under section 2(91), and as such, was entitled to issue summons under section 70, in connection with inquiry initiated against petitioner.

Summons to present at odd hours is not permissible

Though there is no legal embargo which bars proper officer to require the presence of the person at odd hours, it was held in the case of Agarwal Foundries Vrs UOI 121 taxmann.com 134 (Telengana HC) that “the respondents cannot contend that they will interrogate the persons suspected of committing any tax evasion as per their sweet will forcibly keeping them in their custody for indefinite period. If it is done, it has to be construed as informal custody and the law relating to an accused in custody has to be expressly or impliedly applied.”

If accused can get all the benefits under Art.22 of the Constitution, a person in such informal custody can say that he is also entitled to get relief under Art.21 of the Constitution of India. This view has been taken by the Gujarat High Court in the case of Jignesh Kishorbhai and Bhajiawala v. State of Gujarat while dealing with similar actions of authorities under the Prevention of Money Laundering Act, 2002.

Summons to Managing Director / General Manager

CGST Act does not bar proper officer to issue summon to Managing Director or General Manager of a company. It has evolved through jurisprudence that the proper officer must be reasonable and must not act in an arbitrary manner. Honble Jharkhand High Court while dealing with similar case has held in the case of Sudhir Deora Vrs CCE that although the officer has legal right to summon any person including Managing Director or General Manager, but he should not summon them unless it is required for the purpose of an inquiry. Similar view was also express by Honble Delhi High Court in the case of Gail Gas Ltd Vrs DGGI (2018) 100 taxmann.com 242.

Presence of Advocate at the time of recording of Statement

The Supreme Court has in the case of M. K. Kundia Vs. Union of India 2015 (319) ELT 9 (SC) permitted the presence of Counsel for the person who is sought to be interrogated U/s 108 of the Customs Act, 1962 but, however, the presence of the Counsel should be at such distance, which is beyond the hearing distance but within the visible distance-general law is that Advocate cannot accompany the person who is interrogated.

Law of Precedence

The Hon’ble Supreme Court in the case of Commissioner of C.Ex, v. Novapan Industries Ltd., held that “It is settled law that the department having accepted the principles laid down in the earlier case cannot be permitted to take a contrast and in the subsequent cases”.
The Hon’ble Supreme Court in the case of Union of India v. Kamlakshi Finance Corporation Ltd, reported in 1991 (35) E.L.T.433 (S.C.), held that “The adjudicating Officer acts as a quasi-judicial authority. He is bound by the law of precedent and binding effect of the order passed by the higher authority or Tribunal of superior jurisdiction.

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. If the statement has been retracted, the same may not be admitted as evidence in case such retraction is not seen as after-thought and there was no long gap between the date of tendering the statement and retraction of the same. What is important to note is that retraction should be done by way of any affidavit and further it should be done at the earliest and a copy of the same to be submitted to the concerned authority.

Right to remain silent:

A question arises whether a person is required to answer all questions when summoned by a revenue officer during the proceedings, investigation etc. While a person is necessarily required to attend and speak the truth when he answers the questions, he may refuse answer questions on the ground that it would incriminate him. A proper officer as defined under the CGST Act, 2017 is not a police officer and hence the bar under Section 25 Indian Evidence Act, 1872 on confessions made to a police officer being inadmissible may not apply. The person 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. Article 20(3) of Constitution of India guarantees fundamental right against self incrimination. It says no person accused of any offence shall be compelled to be a witness against himself. Further, section 161 of CrPC provides that no person is bound to answer any question which exposes him to a criminal charge.

In the case of Padam Narain Agarwal AIR 2009 SC 254 it was held that a person is not absolved/free from speaking the truth on the ground that such statement could be used against him.

Further in case of NSR Krishna Prasad (1992) 57 ELT 568 AP it was held that right to silence is not an offence and cannot be said to be an obstruction to a proceeding.

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.

Right to refresh ones Memory:

It is advisable to take time rather than giving incorrect statement. Section 159 of Indian Evidence Act allows it.

Right to refer to Books of Accounts:

While recording statement, he is allowed to refer Books of Accounts and other documents before giving statement. He is not expected to remember everything (Chelapati Ganeswar Rao SC).

Inquiry cannot be equated with proceeding

Installation of CCTV Cameras

The Supreme Court in the recent judgment of Paramvir Singh Saini v. Baljit Singh & Ors., AIR 2021 SC 64 has directed that CCTV cameras should be installed at the premises of all the investigation authorities and also where interrogation takes place, to safeguard human rights of the person making the statement.

Issuance of Summons by Multiple Authorities

The Allahabad High Court in the case of G.K.Trading Company v. Union of India 2021-VIL-12-ALH held that the word “inquiry” in Section 70 is not synonymous with the word “proceedings”, in Section 6(2)(b) of the CGST Act. Section 6(2)(b) prohibits the proceedings if the proceedings had already been initiated on the same subject matter.

Section 6(2)(b) reads as under:

Subject to the conditions specified in the notification issued under sub-section (1),

(a) ……;

(b) where a proper officer under the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act has initiated any proceedings on a subject matter, no proceedings shall be initiated by the proper officer under this Act on the same subject matter.

Since inquire is not at par with the word proceedings, therefore, if the inquiry, is initiated on the matter by multiple authorities, cannot be prohibited by virtue of provisions contemplated under section 6(2)(b) of the CGST Act.

Use of Intimidating Language is not permitted

In the case of National Building Construction Co. Ltd. (supra) the observation of the court was that the letters/notices must be appropriately worded. In a given case they may refer to the penal or prosecution provisions to ensure compliance but they should not use intimidated and be minatory language in notice.

Proceedings and Inquiry are Independent

The Allahabad High Court in the case of M/s SIDDHI VINAYAK TRADING COMPANY Vs UNION OF INDIA AND 2 OTHERS 2021-VIL-155-ALH held that the initiation of the proceeding for imposition of tax and penalty was with the issuance of the notice under Section 74 as contained in Chapter XV of UPGST Act and the inquiry under Section 70 of the Act was independent.

Whether anticipatory bail can be granted

Whether anticipatory bail can be granted or not before attending the inquiry proceedings under Section 70 of the CGST. Various High Courts have taken different and contradictory view in this regard.

Affirmative View has been taken in the case of HARDEEP SINGH BANGA AND 6 OTHERS Vs STATE OF U.P. AND 4 OTHERS – 2021-VIL-694-ALH and SRI HANUMANTHAPPA PATHRERA LAKSHMANA Vs STATE – 2020-VIL-249-KAR.
Contradictory view has been taken in the case of DHIRENDRA SINGH Vs THE COMMISSIONER, CENTRAL GST COMMISSIONERATE – 2021-VIL-175-GUJ

Whether Proceedings can be stayed which are initiated pursuant to issuance of Summons?
- The Bombay High Court in the case of JSK MARKETING LIMITED & ANR. Vs UNION OF INDIA & ORS. – 2021-VIL-114-BOM stated that the Petitioner seeking stay on proceedings and consequential penal action, initiated pursuant to issuance of summons. The petitioner assumed that he would be apprehended or arrested during interrogation and inquiry. The Court held that the summons makes it absolutely clear that the petitioners are required to tender oral evidence and produce certain documents. Investigation is under way pursuant to the raid which was carried out at the premises of the petitioners. It is therefore incumbent upon the petitioners to co-operate in the investigation / GST inquiry. The summons issued to the petitioners does not authorize the investigating officer to arrest petitioner No. 2, but have been issued only for the purpose of completing the investigation into evasion of GST undertaken by respondent No. 2. In this view of the matter, we do not see any reason for the petitioners / petitioner No. 2 to apprehend or arrest on presenting himself before the investigating officer in response to the summons which have been issued to the petitioners. In view of the aforementioned legal position, the summons issued to the petitioners / petitioner No. 2 are valid and no interference is called upon.
- In the case of National Building Construction Co. Ltd. v. Union of India [2018] 100 taxmann.com 307 the observation of the Court was that “Courts would, however, not interfere merely because the authority has exercised discretion that is not acceptable to the assessee. The choice whether or not to exercise power of special audit, summons etc. is for the respondents to decide and exercise, and not for the petitioner to direct.”

Can a Writ be preferred against Summons

To a limited extent, the Writ Court can go into the question. The Hon’ble Allahabad High Court in Ankit Bhutani Vs Union of India (Writ Tax No. 132 of 2020) has refused to entertain a writ petition of an applicant who consistently evaded summons of GST Intelligence as the court believed that consistent absence was a sign of disinterest to cooperate with the revenue department.

Is recovery permissible during Inquiry?
- During investigation or inquiry the Authority cannot force and compel to pay any amount of tax etc. by the person concern. Even the Authority shall not take such coercive steps which compel the person to pay the tax. In the case of Clear trip Private Ltd. and Ors. a Bench of the Bombay High Court said that “there is no question of any recovery of tax by coercive means, unless the investigation results into issuance of a show cause notice, an opportunity to the Petitioner to resist the demand, an adjudication thereof by a reasoned order and protective remedies such as appeals. We do not think that any recovery by coercive measures is straightway permissible.”

In the case of Bhumi Associate the Gujarat High Court said that “No recovery in any mode by cheque, cash, e-payment or adjustment of input tax credit should be made at the time of search/inspection proceedings under any circumstances.”

Important Direction by Hon’ble Telangana High Court

In the case of M/s AGARWAL FOUNDRIES PRIVATE LIMITED RAMA TOWERS AND 3 OTHERS Vs UNION OF INDIA AND 9 OTHERS – 2020-VIL-540-TEL, the Hon’ble Court allowed the writ petition and directed as under:

Violence and Coercion by GST Officials– The respondents cannot claim any liberty to torture or use physical violence during the course of search, investigation or interrogation under the CGST Act, 2017 against persons suspected of tax evasion.
Timing for appearance– Any interrogation of petitioners or their employees shall be between 10:30 a.m. and 05:00 p.m. on week days.
Presence of Lawyer – The lawyer may present in the inquiry in the visible range, who shall not be in hearing range.
Restriction upon erring officer – The Court directed that the erring official shall not participate in the enquiry, and it shall be transferred to another official.
Location of investigation – The court disallowed to conduct the inquiry of about 50 persons of the petitioner in New Delhi head office while consider the situation of covid-19 pandemic and the high cost involved. The court directed that the petitioner nos.2 to 4 alone can be summoned to New Delhi for the purpose of the above inquiry by the respondents on one occasion for two to three days, and rest of their interrogation and those of their employees shall be conducted at zonal office Hyderabad.

Right to Cross Examine

There is a little difference in Section 9D of Central Excise Act and Section 136 of CGST Act as in Section 9D (2), it has been provided that examination and cross examination shall apply to any proceedings under Central Excise Act, which is missing in Section 136 of CGST Act and, therefore the question arises as to whether statements recorded under Section 70 shall have to be taken as gospel truth without being put to test of cross-examination.

In this reference, the Hon’ble Supreme Court in Andaman Timber Industries Vs. CCE: MANU/SC/1250/2015 has held that if cross-examination is not allowed, it amounts to a violation of the principle of natural justice and, therefore, held as under:-

Not allowing the Assessee to cross-examine the witnesses by the Adjudicating Authority though the statements of those witnesses were made the basis of the impugned order is a serious flaw which makes the order nullity in as much as it amounted to a violation of principles of natural justice.

The Tribunal in Bussa Overseas Properties Ltd.-MANU/CM/0665/2002 has held that the adjudicating authority is bound by general principles of evidence. This decision stands affirmed by the Hon’ble Apex Court reported as 2007 (216) ELT 659 (SC). He also relied upon the decision in Nazir Ahmed vs. King-Emperor, MANU/PR/0111/ 1936: AIR 1936 PC 253 and in the case of State of U.P. vs. Singhara Singh, MANU/SC/0082/1963.

Section 138 of Evidence Act – Order of examinations

Witnesses shall be first examined-in-chief then (if the adverse party so desires) cross-examined, then (if the party calling him so desires) re-examined. The examination and cross-examination must relate to relevant facts but the cross-examination need not be confined to the facts to which the witness testified on his examination-in-chief.

The Karnataka High Court in Sharadamma vs. Kenchamma and Ors.: MANU/KA/ 8690/2006, has held that any witness before being put to cross-examination, there has to be examination-in-chief.

Under Section 138 of the Indian Evidence Act, cross-examination follows chief-examination, but not without chief-examination. If there is no chief-examination, there is no cross-examination. It is the only witness who is examined in chief who can be cross-examined. Therefore, a prayer for cross-examination of the Plaintiff even when the Plaintiff has not been examined in chief is ridiculous and not provided for under Section 138 of the Evidence Act.

The observations of Tribunal in CCE Vs. Kuber Tobacco India Ltd. and Ors.: MANU/CE/0146/2016 in this extremely relevant.

The main contention of the appellant is that the deponents whose statements have been relied upon by the adjudicating authority were not put to examination-in-chief before providing an opportunity of cross examination.

A plain reading of sub-section (1) of section 9D makes it clear that clauses (a) and (b) of the said sub-section set out the circumstances in which a statement, made and signed by a person before the Central Excise Officer of a gazetted rank, during the course of an inquiry or proceeding under the Act, shall be relevant, for the purpose of proving the truth of the facts contained therein. Therefore, there is no doubt about the legal position that the procedure prescribed in sub-section (1) of section 9D is required to be scrupulously followed, as much as in adjudication proceedings as in criminal proceedings relating to the prosecution

The Hon’ble Karnataka High Court has relied upon Section 9D(1) which is still part of Section 136 of the CGST Act and, therefore, the ratio of the judgment of Hon’ble Karnataka High Court shall apply with full virulence.

The Divisional Bench of Delhi High Court in Basudev Garg Vs. CCE: MANU/DE/1876/2013, has held while relying upon the observations of the Supreme Court as contained in Swadeshi Polytex Ltd. (2000) 122 ELT 641 (SC) and Laxman Exports Ltd. MANU/SC/ 0548/2002, as the general propositions, there can be no denying that when any statement is used against the assessee, an opportunity of cross-examining the persons who made those statements ought to be given to the assessee.

The Divisional Bench of Delhi High Court in J and K Cigarettes Ltd. Vs. UOI: MANU/DE/ 2136/2009 observed that “Going by this nature of the proceedings, which can entail civil and/or evil consequences to the show-cause notices, submission of learned Counsel for the petitioner was that the right of the accused to cross-examine persons, whose statements are relied upon against him, is a very important facet of the principles of natural justice.

Normally, the rule is that if the witness is not cross-examined, then the examination-in-chief/statement of that witness cannot be termed as evidence and, therefore, cannot be read in evidence. He submitted that necessity of allowing cross-examination of the witnesses in departmental adjudication proceedings is well-settled and accepted, as is clear from the following decisions:

Ripen Kumar v. Deptt. of Customs 2003 (160) ELT 60 (Delhi High Court)
New Decent Footwear Industries v. UOI MANU/DE/0821/2002 (Delhi High Court)
Arya Abhushan Bhandar v. Union of India MANU/SC/0552/2002
Gyanchand Sant Lal Jain v. Union of India 2001 (136) ELT 9 (Bombay High Court)
Kellogg India Pvt. Ltd. & Madhukar Patil v. UOI MANU/MH/0802/2005 (Bombay High Court)

The Divisional Bench of Gujarat High Court in the case of CC Vs. Motabhai Iron & Steel Industries MANU/GJ/1223/2014 where it has been held that “no reliance can be placed on the statement of such witnesses who has not subjected himself to cross-examination by the affected party. The cross-examination is an extremely relevant tool in the hands of the assessee to counter the case of the Department as, as said earlier, the statements are, on most of the occasions, are not voluntary and, therefore, to bring the truth on records, their cross-examination is absolutely indispensable.

Summons cannot be issued when details are already available with the Department

If all details are available with the department, the issue of summons to officers of the company or other persons may not be necessary. The Gujarat High Court in A.S. Corporation v. Union of India imposed costs and issued a direction that the petitioner assessee shall not be issued any further summons in relation to the same subject matter, unless and until the respondent department is in possession of any specific evidence requiring the presence of the partners of the petitioner firm after coming across such evidence pursuant to inquiries/investigations.

Evidentiary value of statement given under Summon Proceedings

As per section 25 and 26 of the Indian Evidence Act 1872, confessional statement given before a police officer is inadmissible and holds no value. Can that provision be invoked to argue whether GST Officer shall be considered a police officer for the purpose of CGST Act and statement given to him is inadmissible.

Hon’ble Telengana High Court in the case of P V Ramama Reddy V UOI (2019) 104 taxmann.com 407 has held that GST Officers are not police officer to whom section 25 of the Indian Evidence Act 1872 would apply. Under the erstwhile regime some jurisprudence has evolved as to whether an officer under a revenue law could exercise the power of a police officer.

Honble Apex Court in the case of State of Punjab Vrs Barkat Ram AIR 1962 SC 276 has held that Custom Officer cannot be equated with a police officer.

Further constitution bench of Honble Apex Court in the case of Soni Ballavdas Liladhar Vrs Asst Collector of Customs AIR 1965 SC 481 reiterated the same position that custom officers are not police officers and accordingly statement made to them are not inadmissible under section 25 of Indian Evidence Act.

Similar view was taken again by Honble Apex Court in the case of Ilias Vrs The Collector of Customs AIR 1970 SC 1065 and ruled that Central Excise Officer are not police officer and he do not have power to submit a charge sheet u/s 173 of CRPC.

It is worthwhile to note here that the statement so recorded during summon is relevant only for prosecution in an offence. Meaning thereby, section 136 cannot be invoked for other purposes like making assessment, adjudication, penalty proceedings etc.

Latest Guideline being Instruction No. 03/2022-23 dated 17.08.2022

It was brought to the notice of CBIC various instances where there were excesses committed in issuance of summons u/s. 70 of the CGST Act, 2017. Coupled with that there were certain judicial pronouncements which laid down dos and don’ts with regard to the issuance of summons and the proceedings following it. To streamline the whole process of issuance of summons, the Investigation Wing of GST had issued Instruction No. 03/2022-23dated 17.08.2022. It is advisable to go through the same to ascertain whether the said instructions are followed while issuing a summons u/s. 70 of the CGST Act, 2017.

(Author is a well known Tax Advocate practicing at Ahmedabad. He is former president of Tax Advocate Association Gujarat)