This Tax Alert summarizes the Office Memorandum [1] issued by the GST Council to address the varied practices followed by Central and State authorities in issuing recurring show cause notices (SCNs) and other actions in cases where enforcement action has been initiated.
Central and State tax administrations have the power to take intelligence-based enforcement action, irrespective of whether the taxpayer is covered under Central or State tax jurisdiction. Divergent practices are followed on issuing recurring SCNs and other consequential actions in situations where an officer of the Central tax authority initiates intelligence-based enforcement action against a taxpayer administratively assigned to the State tax authority and vice versa. In few cases, the authority initiating enforcement action also issues the recurring SCNs, whereas in other cases, the same is left to the jurisdictional authorities.
Accordingly, GST Council has clarified the following:
- A taxpayer administratively assigned to a State tax authority can also be subjected to enforcement action by the Central tax authority (and vice versa). In such cases, all consequential actions relating to the case, including but not limited to appeals, review, adjudication, rectification, etc., will vest with the enforcement initiation authority. However, refund shall be granted by jurisdictional tax authority only.
- Issuance of recurring SCNs does not involve a fresh investigation. Therefore, such recurring SCNs may be issued by jurisdictional tax authorities as they can access taxpayers' records and returns, check whether grounds of SCN still exist, and take a view for issuance of recurring SCN based on facts.
Comments
- Earlier, Central Board of Indirect Taxes and Customs (CBIC) vide letter dated 5 October 2018 had clarified that both Central and State tax officers are authorized to initiate intelligence-based enforcement action irrespective of the administrative assignment of the taxpayer.
- The present clarification aims to address certain administrative issues arising out of enforcement actions initiated by Central or State tax authority, irrespective of their jurisdiction.
- Businesses are likely to face difficulty since they will be required to submit relevant documents and resolve queries from the department multiple times for the same issue.
