Officers to face strict disciplinary action for coercive GST collection

Amid companies such as Swiggy approaching courts to get relief from forceful GST payments, the Central Board of Indirect Taxes and Customs (CBIC) has instructed GST commissioners to take stern action against errant officers when complaints about coercive tax payments during search operations or investigations are received. However, tax consultants are still sceptical that this instruction will stop coercive recovery for GST payments.

“Principal chief commissioners/chief commissioners… are advised 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, the same may be enquired at the earliest and in case of any wrongdoing on the part of any tax officer, strict disciplinary action following rules may be taken against the defaulting officers,” CBIC said in its instruction.

However, the instruction does not bar voluntary payment of taxes by companies during the operation. This drew flak from experts.

Abhishek Rastogi, partner, Khaitan & Co., wondered, “If voluntary tax payment is done then why would the taxpayer seek assistance from the court under the writ jurisdiction?”

Rajat Mohan, senior partner at AMRG & Associates, said like most departmental clarifications, these instructions also have limited practical application. “This clarification will have limited practical application, and thereby, taxpayers being searched are still dependent on the whims and mercies of the search team,” he feared.

Rastogi said the instruction has been issued subsequent to the relief given by courts to companies. For instance, the Karnataka high court in a case related to Bundl Technologies, which operates food delivery platform Swiggy, had directed the revenue department last year to consider a refund of Rs 27.51 crore to the company, which had alleged that money was collected from it using coercion during an investigation by the directorate general of GST (intelligence), about alleged wrongfully availing input tax credit. 

Swiggy’s owners had contended that the firm had deposited Rs 15 crore in the first tranche, followed by Rs 12.51 crore in the second in 2019, to secure the release of its directors who were summoned and locked up with threat of arrest. It had also said no show-cause notice was issued by the officers, months after the probe was initiated.

The court had discarded the revenue department’s defence that payment by the assessee was a goodwill gesture and should be construed as tax in furtherance of self-ascertainment. It said the department’s contention that the investigation is pending itself indicates that the contention of self-ascertainment as made by it, was an “after-thought” and was put forward as a defence to the petitioner’s assertion that payment of amount has been made involuntarily.

Tax consultants say Swiggy’s was not the only case in this regard.