Taxpayers: GST officials can’t force taxpayers to pay tax during research: CBIC

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Tax authorities will now have to take action if a taxpayer makes a voluntary payment of tax during a search. In a move to limit instances of the use of force or coercion, the Central Board of Excise and Customs (CBIC) has directed its field formations to collect tax assessments in accordance with the legal process after the issuance of an arbitration order and not during research.

The move comes amid complaints of the use of force and coercion by tax authorities for carrying out a ‘clawback’ during a search or inspection.

“In the event of wrongdoing on the part of a tax official, strict disciplinary action, in accordance with the law, may be taken against the offending officers,” the CBIC said in an internal memo to to Principal Commissioners/Commissioners of Central GST (All Areas), Commissioner, GST Investigation, released late evening May 25.

He added that in the event that a complaint is received from a taxpayer regarding the use of force or coercion by one of his agents to obtain the amount deposited during a search, inspection or an investigation, it must be requested as soon as possible.

By law, no recovery can be made unless the amount becomes due under an order made by the contracting authority.

“It is specified that there can be no circumstances requiring the collection of tax assessments during a search, inspection or investigation procedure,” the instruction states, adding that, if a taxpayer wishes voluntarily file the TPS liability, this will be done via DRC 03 on the TPS portal.

This decision is significant as there have been growing complaints of GST officials using force or coercive measures to obtain collection of unpaid taxes during raids and house searches.

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

Recently, the Gujarat High Court expressed its concerns in the judgment and advised the department to order its officials to oppose such measures.

In March, the Karnataka High Court ruled that if tax is collected during an investigation by coercion, such collection is in violation of Section 265 and 300A of the constitution and is subject to reimbursement.

“The matter has been reviewed. The Board felt the need to clarify the legal position of the voluntary payment of taxes to ensure proper application of the law and to protect the interests of taxpayers,” the CBIC said.

Legal position

The CBIC pointed out that, by law, no recovery can be made unless the amount becomes due under an order issued by the contracting authority.

“It is specified that there can be no circumstances requiring the collection of tax assessments during a search, inspection or investigation procedure,” the instruction states, adding that taxpayers can voluntarily file the liability of the TPS via DRC-03 on the TPS portal.

This decision is significant because there were increasing complaints of TPS officers using force to obtain recovery during searches.

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