Amount Recovered During Search Proceeding—Whether Forced or Voluntary—S. Swaminathan

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The Tax Publishers GST--Recovery of Tax Amount Recovered During Search Proceeding--Whether Forced or Voluntary S. Swaminathan The learned author seeks to analyse an issue as to whether huge amount collected during the search proceeding can be said to be voluntary payment by the taxpayer when such payment was not aligned with provisions of sub-section (5) of section 73 or sub-section (5) of section 74. The point for consideration is whether when can such payment be regarded as voluntary payment. The present article throws light on this issue. 1. Introduction During the course of search, inspection or invetigation, the departmental authorities remain in offensive mode and the taxpayer remain in defensive mode. The departmental authories tend to pressurise the taxpayers to make payment of tax liability detected during such proceedings to achieve their target of tax collection. In some cases, the taxpayer himself comes forward to make such payment. However, in most of the cases, the taxpayer make payment under coercion of the departmental authorities by way of threat of penal proceedings. In order to keep check on such actions of the departmental authorties, the Gujarat High Court in the case of Bhumi Associate v. Union of India through the Secretary, SCA No. 3196 of 2021, has formulated the following guidelines for resolution of the above issue: "The Central Board of Indirect Taxes and Customs as well as the Chief Commissioner of Central/State Tax of the State of Gujarat are hereby directed to issue the following guidelines by way of suitable circular/instructions: (1) No recovery in any mode by cheque, cash, epayment or adjustment of input tax credit should be made at the time of search/inspection proceedings under Section 67 of the Central/Gujarat Goods and Services Tax Act, 2017 under any circumstances. (2) Even if the assessee comes forward to make voluntary payment by filing Form DRC03, the assessee should be asked/advised to file such Form DRC03 on the next day after the end of search proceedings and after the officers of the visiting team have left the premises of the assessee. (3) Facility of filing complaint/grievance after the end of search proceedings should be made available to the assessee if the assessee was forced to make payment in any mode during the pendency of the search proceedings. (4) If complaint/grievance is filed by assessee and officer is found to have acted in defiance of the aforestated directions, then strict disciplinary action should be initiated against the concerned officer." In pursuance of the directions of the High Court, the CBIC came out with a detailed instruction vide Instruction No. 01/2022-23 (GST-Investigation], dated 25-5-2022 directing the revenue officers not recover the tax during the search or survey proceeding forcefully. In the above Instruction, the following guidelines have been issued: SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

GST--Recovery of Tax

Amount Recovered During Search Proceeding--Whether Forced or Voluntary

S. Swaminathan

The learned author seeks to analyse an issue as to whether huge amount collected during the search proceeding can be said to be voluntary payment by the taxpayer when such payment was not aligned with provisions of sub-section (5) of section 73 or sub-section (5) of section 74. The point for consideration is whether when can such payment be regarded as voluntary payment. The present article throws light on this issue.

1. Introduction

During the course of search, inspection or invetigation, the departmental authorities remain in offensive mode and the taxpayer remain in defensive mode. The departmental authories tend to pressurise the taxpayers to make payment of tax liability detected during such proceedings to achieve their target of tax collection. In some cases, the taxpayer himself comes forward to make such payment. However, in most of the cases, the taxpayer make payment under coercion of the departmental authorities by way of threat of penal proceedings.

In order to keep check on such actions of the departmental authorties, the Gujarat High Court in the case of Bhumi Associate v. Union of India through the Secretary, SCA No. 3196 of 2021, has formulated the following guidelines for resolution of the above issue:

"The Central Board of Indirect Taxes and Customs as well as the Chief Commissioner of Central/State Tax of the State of Gujarat are hereby directed to issue the following guidelines by way of suitable circular/instructions:

(1) No recovery in any mode by cheque, cash, epayment or adjustment of input tax credit should be made at the time of search/inspection proceedings under Section 67 of the Central/Gujarat Goods and Services Tax Act, 2017 under any circumstances.

(2) Even if the assessee comes forward to make voluntary payment by filing Form DRC03, the assessee should be asked/advised to file such Form DRC03 on the next day after the end of search proceedings and after the officers of the visiting team have left the premises of the assessee.

(3) Facility of filing complaint/grievance after the end of search proceedings should be made available to the assessee if the assessee was forced to make payment in any mode during the pendency of the search proceedings.

(4) If complaint/grievance is filed by assessee and officer is found to have acted in defiance of the aforestated directions, then strict disciplinary action should be initiated against the concerned officer."

In pursuance of the directions of the High Court, the CBIC came out with a detailed instruction vide Instruction No. 01/2022-23 (GST-Investigation], dated 25-5-2022 directing the revenue officers not recover the tax during the search or survey proceeding forcefully. In the above Instruction, the following guidelines have been issued: