GST officials can’t force recovery during searches

Tax authorities will now face action if a taxpayer makes voluntary payment of tax during a search. In a move aimed at curbing instances of use of force or coercion, the Central Board of Indirect Taxes and Customs (CBIC) has directed its field formations that recovery of tax dues should be made following the due legal process after issuance of adjudication order and not during searches.

The move comes in the backdrop of complaints of use of force and coercion by tax authorities for making 'recovery' during the course of search or inspection.

“In case of any wrongdoing on the part of any tax officers, strict disciplinary action as per law may be taken against the defaulting officers,” the CBIC said in an internal department note addressed to principal commissioners/commissioners of Central GST (all zones), the commissioner, GST Investigation, issued late evening on May 25.

It added that in case, any complaint is received from a taxpayer regarding use of force or coercion by any of their officers for getting the amount deposited during search or inspection or investigation, it has to be enquired at the earliest.

As per the law no recovery can be made unless the amount becomes payable in pursuance of an order passed by the adjudicating authority.

“It is clarified that there may not be any circumstance necessitating recovery of tax dues during the course of search or inspection or investigation proceedings,” the instruction said, adding that, if a taxpayer voluntarily wants to deposit GST liability, it will be done via DRC 03 on the GST portal.

The move is significant as there were increasing instances of complaints against GST officials using force or coercive measures to get recovery of unpaid taxes during raids and searches.

The instruction has added that some of the taxpayers have also approached High Courts in this regard.

Recently Gujarat High Court has flagged their concerns in the judgement and had advised the department to instruct their officials against any such measures.

In March, Karnataka High court ruled that if tax is collected during investigation by coercion, such collection is in violation of article 265, and 300A of constitution and is liable for refund.

“The matter has been examined. Board has felt the necessity to clarify the legal position of voluntary payment of taxes for ensuring correct application of law and to protect the interest of the taxpayers,” CBIC said.

Legal position
The CBIC pointed out that as per the law no recovery can be made unless the amount becomes payable in pursuance of an order passed by the adjudicating authority.

"It is clarified that there may not be any circumstance necessitating recovery of tax dues during search or inspection or investigation proceedings," the instruction said, adding that taxpayers can voluntarily deposit GST liability via DRC-03 on GST portal.

The move is significant as there were increasing instances of complaints against GST officials using force to get recovery during searches.