In a bid to quell harassment of taxpayers, especially the top management in India Inc, the Central Board of Excise and Customs (CBEC) has instructed its field officials (from service tax and excise units) to refrain from issuing summons to gather information.
The recently issued written set of instructions by the CBEC requires field officials to send politely-worded letters if these would also serve the purpose of gathering information or documents required in the course of a service tax or excise inquiry or investigation.
Under Section 14 of the Central Excise Act, summons can be issued to taxpayers when a service tax or excise inquiry is underway. It can be issued for recording statements or even for collecting evidence or documents.
The 'summoned' person, who can even be a CEO with no hands-on experience in tax issues, is required to appear before the excise or service tax authorities with the required information or documentary evidence. Generally, a limited time frame of a few days is made available to gather and submit a host of information. Such powers also give unscrupulous officials an opportunity to arm-twist taxpayers.
Industry representatives brought to the notice of the CBEC that summons were being issued in a routine manner by field officials to top senior management in India Inc to gather even basic information or documents. Such action often led to harassment. In this backdrop, CBEC has now issued written instructions to ensure summons are issued only when absolutely necessary.
At a policy level, similar instructions had been issued even in earlier years -in 1989 and later in 2007. These circulars had also called for discretion in issue of summons by excise and service tax officials.
CBEC's instructions seek to strike a balance between adopting a tax-friendly approach and the need to gather information in the course of a tax inquiry. It states: "While the evidentiary value of securing documentary and oral evidence under the legal provision can hardly be over emphasized, nonetheless, 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 the investigation," The instruction also explicitly states that senior management (such as CEOs, CFOs or general managers of large corporations or PSUs) should not generally be summoned. These persons need to be summoned only when there are indications of their involvement in the decision-making process that led to loss of tax revenue.
Sunil Gabhawalla, chartered accountant, says, "Issue of this notification is a welcome step. However, there is an element of subjectivity involved, a CFO could be regarded as a decision-making authority -whose decision led to a loss of revenue. In this context, the CFO could still be summoned. It remains to be seen how well field officials understand the spirit behind this notification."
In addition, the power to issue summons requires prior written permission of an assistant commissioner, with reasons for issue of the summons to be made in writing. Gabhawalla adds, "Perhaps for large companies, where summons are sought to be issued to the CEO or any other senior ranking official, the power could have been vested with the commissioner."
Source:- timesofindia.indiatimes.com
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