FEBRUARY 28, 2018

By Vijay Kumar

THOUGH this and the previous article can be described as ‘stand-alone' like the GST or the minor accounting issue in PNB (which was easier than somebody walking off with the Delhi Metro in his pocket) or Surpanakha's laughter, it may perhaps be useful if you read the previous article before reading this.

Can the GST officers summon anybody for any inquiry? What is the procedure to summon; who should be summoned; can personal attendance be insisted upon? These are issues which will be resolved or clarified in the days to come either by the Courts or the powers that be, after many summonses are issued. There is a belief among Tax Officers that while you summon, it is always better to summon the top persons. Thus you find Managing Directors and senior executives of the assessee companies being summoned and the officers get very angry if the head honchos do not make personal appearance.

Sometime back a very famous film personality, let's call him SB, was summoned by an ace investigating agency to record a statement that he owed the government service tax. SB sent his accountants and managers to the department, but they wanted SB and SB only. SB asked me why the department was insisting on his personal appearance and if there was any way to avoid it. I asked him why he was so adamant and why couldn't he simply attend. SB told me, "the moment I enter the Service Tax Office, some TV channels would get information and they would go full blast on the ‘investigation' against me and the ‘interrogation' I am undergoing and all the illegal activities I am supposed to have successfully carried out." I persuaded SB to go to the tax agency's office. They kept him there for most part of the day, took some inconsequential statements and sent him off. The poor officers were blissfully unaware of the fact that SB lost a few lakhs of rupees simply to attend to the summons. The fact is the MDs have to slog it out to earn enough money to pay the taxes and certainly their time is better spent in places other than tax offices to answer silly questions.

And now Nirav Modi's lawyer states that the ED summons requires him to be present in person or through his authorised representative.

Here is a serious account of what they record in statements after summons.

Martinho Paul Ferrao is a deputy manager (legal & secretarial) in the Great Eastern Shipping Company in Mumbai. He has been issued with a card bearing staff code No. 573 by the general manager of the said company which he invariably used for accessing his office and exiting therefrom. Tej Ram, senior intelligence officer, DRI, before whom Ferrao gave these and host of other details in his statement under Section 108 of the Customs Act, knows how swiping of ID cards is relevant to the investigation he was conducting. One may ask him. Ferrao and his wife used to visit Akil A. Rassai, a friend whom Ferrao knows for ten long years. During one such visit, Akil shared a secret that import and export business is very lucrative.

This is an extract from the Order of the CESTAT in Imperial Trading LlcImpex Enterprises - 2005-TIOL-136-CESTAT-MUM

The good Board, CBEC has been very fair in communicating its displeasure in arbitrary and useless summons by the field officers.

In F. No. 207/07/2014-CX-6, dated January 20, 2015, the CBEC had told the field officers,

It has been brought to the notice of the Board that in some instances, the summons under Section 14 of the Central Excise Act, 1944 have been issued by the field formations to the top senior officials of the companies in a routine manner to call for material evidence/ documents.

Besides, summons have been issued to enforce recovery of dues, which are under dispute.

As per Section 14 of Central Excise Act, 1944, summons can be used in an inquiry for recording statements or for collecting evidence/ documents. While the evidentiary value of securing documentary and oral evidence under the said legal provision can hardly be over emphasized, nevertheless, it is desirable that summons need not always be issued when a simple letter, politely worded , can also serve the purpose of securing documents relevant to investigation.

It is emphasized that the use of summons be made only as a last resort when it is absolutely required.

The following guidelines were issued by the Board to be followed in both Central Excise and Service Tax matters: -

(i) Power to issue summons are generally exercised by Superintendents, though higher officers also issue summons. 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;

(ii) 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;

(iii) In all cases, where summons are 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 authorised the issue of summons.

Further, senior management officials such as CEO, CFO, General Managers of a large company or a PSU 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.

These instructions may be brought to the notice of all the field officers for strict compliance. Non observance of the instructions will be viewed seriously. Hindi version would follow.

In spite of the warning that disobedience will be viewed seriously, both in English and Hindi, the routine summons to call for records and information continued unabated.

Interestingly 26 years before the abovementioned instruction was issued, Board had issued the below-mentioned instruction in F No. 208/122/89-CX.6, dated October 13, 1989:-

Complaints have been received from the trade that in some of the Collect orates summons under Section 14 of the Central Excises and Salt Act, 1944 are being issued to the Managing Directors and other high officers with a view to enforce recovery of dues which are under dispute. Action under this section is to be taken only as a last resort in cases where assessees are not cooperating or investigations are to be completed expeditiously. This section should not be used for harassing the top management for forcing them to pay up demands which are disputed by them. For recovery of demands normal procedure under the law should be followed.

If any instance of issue of summons to Managing Directors and other Directors without justification is noticed, a serious view will be taken by the Board. Collectors will be held personally responsible for enforcing these instructions in their charges.

In the 2015 Circular, Board was very conscious of the 1989 Circular and prominently mentioned it and even implicitly admitted that the 1989 Circular was not being followed.

In 2006, the Directorate General of Central Excise Intelligence, issued an instruction in F.No. 406/CF/15/2006, dated: May 19, 2006 as given below:

It has been recently brought to the notice of the Board that Summons under Section 14 of the Central Excise Act, 1944 are being issued to call for material evidence/documents in a routine manner. The evidentiary value of securing documentary and oral evidence under the said legal provisions can hardly be over emphasized. Nevertheless, it is desirable that summons need not always be issued when a simple letter, politely worded, can also serve the purpose of securing documents relevant to investigation. Board has emphasized the use of summons only as a last resort when it is absolutely required. Para 97 of the Preventive Manual brought out by this Directorate in 2004 also refers to precautions to be taken in summoning a person. The same should be observed in both letter and spirit.

In 2007, the Board issued another Circular, F No. 137/39/2007-CX-4, dated February 26, 2007, which is reproduced below:

It has come to the notice of the Board that on many occasions, merely for obtaining information or documents pertaining to service tax cases/matters, officers of field formations or intelligence agencies resort to issuance of summons (U/s 14 of the Central Excise Act, 1944 as is made applicable in service tax cases U/s 83 of the Finance Act, 1994) to either service taxpayers or to persons who are not registered with the department. From the nature of information/documents called for, it is clear that many times such information/documents can easily be obtained by making a telephonic request or writing a simple letter to the person concerned. Instead summons are issued in a routine manner, under the signature of superintendent or the senior intelligence officers. (SIOs). The harsh and legal language of the summons not only causes unnecessary metal stress & embarrassment and instills fear in the minds of the receiver but may also become a source of harassment or even unethical practices. Board has taken a serious note of this practice.

02. The undersigned is, therefore, directed to communicate the following directions of the Board for compliance,-

a) For calling for information/documents, normally the mode of communication should be either in the form of a telephone call or by way of sending a simple letter;

b) Issuance of summons should be resorted to, only when the above mentioned modes of communications are found to be ineffective or are likely to jeopardize revenue interest or when it is essential to ensure personal presence of the person concerned to tender evidence or record statement in connection with a service tax evasion case;

c) In cases mentioned under (b) above, the summons should be issued after obtaining prior written permission from an officer not below the rank of Deputy Commissioner with reasons for issuance of summons to be recorded in writing;

d) In case, for unavoidable 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;

e) In all cases, where summons are issued, the officer issuing summons must submit a report on proceeding that took place during the presence of the taxpayer/person summoned, and the officer authorizing issuance of summons must satisfy himself that no harassment has been caused during the visit of the person summoned to the office.

03. The above instructions may kindly be brought to the notice of all officers for compliance. Non-observance of these instructions would be viewed seriously.

The theme song is – the Board is against such summons, but they still continue.

What will be the position under GST?

What actually prompted me to write this article was a recent instruction from the CBEC to the field officers:

In INSTRUCTION NO. 03/2018-Customs; dated: February 16, 2018, the Board wrote to the field,

It has been brought to the notice of the Board that field formations are approaching DRI for seeking CDRs and Customer details of phone numbers from telecom service providers.

This is reportedly being done as telecom service providers are not providing these details to the field formations since they are not a designated 'Law Enforcement Agency' like DRI under the provisions of Section 5(2) of Indian Telegraph Act, 1885.

In view of the above, it is clarified that field formations can obtain the SDR/CDR details directly from telecom service providers under the provisions of Section 108 of the Customs Act, 1962 which empowers any Gazetted Officer of Customs to summon any person to give evidence or to produce documents. For investigation purposes, DRI also obtains SDR/CDR details from telecom service providers under the provisions of Section 108 of the Customs Act, 1962. Hence, field formations may not refer such matters to DRI and seek the required details directly from the telecom service providers under the provisions stated above.

Why to depend on some archaic law, when you can get all that you want through that powerful weapon called SUMMONS?

CIC raps GSTN: In an order delivered last week the Central Information Commission observed, "it is appalling to learn that an important, significant and critical area concerning the implementation of GST Network still required streamlining and consolidation which needs to be attended to forthwith in the larger public interest". The Commission was dealing with an appeal filed by activist RK Jain who informed the Commission that:

He had downloaded certain details as available on the official website of GSTN which made startling revelations.

GSTN was a private limited company registered under Section 25 of the Companies Act and that the HR Policy had not been finalized, the detailed norms including delegation of powers for discharge of GSTN functions was under preparation, the rules/regulations and manual etc. to be used by its employees for discharging their functions was also under preparation, the annual statement of accounts and balance sheet was available till the period 2013-2014 only and that it was reflected that on completion of manual, rules and regulations, recruitment etc., an arrangement shall be put in place with the consultation of all the stake holders of the Company including tax payers.

The attention of the Commission was drawn to the alarming and pathetic state of affairs of the GSTN which was meant to serve the public at large.

The CIC advised the GSTN to suomotu disclose the information in compliance with Section-4 of the RTI Act, 2005 to ensure transparency, objectivity and accountability in the functioning of the Public Authority.