The tax officials often act as quasi-judicial authorities in disposing of taxation disputes between the taxpayer and the government. The resolution of disputes require keen investigation and access to evidences like financial documents, invoices, account statements etc. Though there are powers of searches, raids etc which has been bestowed under direct taxation laws as well indirect taxation laws yet it becomes very important to ask the taxpayer for production of required documents themselves before initiating any coercive actions like searches and raids. Hence, in order to facilitate the taxpayer before coercive action, there is power to summon. Summons, as understood in legal parlance is intimation requiring a person to whom it is issued to appear to give evidence and or produce documents etc.
Power to summon is mentioned in direct tax cases under section 131 of the IT act 1961. The same is mentioned for indirect taxation cases in section 14 of erstwhile CE act 1944 subsumed under section 70 of the CGST act 2017 and section 108 of the customs act 1962.
If we look at the text as mentioned in section 14 of erstwhile CE act 1944, though it is written that the proceedings under the section are termed as judicial proceeding as in section 193 and section 228 of IPC 1860 but the power was somewhat diluted as there was no mention of the situation where a taxpayer fails to appear before the summoning authority even after reasonable time or repeated opportunities.
In such situations, the practical procedure was very cumbersome. The summoning authority needed to approach the civil court through their lawyer after giving intimation to the senior authorities for the execution of summons against the taxpayer. The civil court in such cases either ordered the taxpayer to appear before the summoning authority or has the powers to invoke section 172, section 173, section 174 and section 175 of IPC 1860 as the case may be, against the taxpayer for non-appearance on being summoned. This was a big hurdle in the course of investigation and an opportunity to the taxpayer for defiance of law. The judicial process in the civil courts is often time consuming and an additional burden on the exchequer.
This was addressed in the IT act 1961 where in section 131 of the act itself, it was added that the summoning authority is vested with the same powers as court under the code of civil procedure 1908 (5 of 1908). This provision under the act read with rule 10 orders XVI of the CPC 1908 gave powers to the summoning authority to issue an arrest warrant against the taxpayer in the event of deliberate defiance of summons even after giving reasonable time and opportunity to appear for the production of evidences before the authorities. Thus, the need to knock at the doors of a civil court for the execution of summon was done away with under the direct taxation cases.
However in the cases of indirect tax investigations as in central excise and service tax, this defiance of summons were continued and the tax authorities were often left red faced and clueless. They were forced to initiate coercive actions like raids and searches, which were often not that fruitful as in such cases the element of surprise used to be missing.
The issue seems to be addressed in the new CGST act 2017 where in section 70 states that “the proper officer under this Act shall have power to summon any person whose attendance he considers necessary either to give evidence or to produce a document or any other thing in any inquiry in the same manner, as provided in the case of a civil court under the provisions of the Code of Civil Procedure, 1908.
This addition of the word Civil court under the provisions of the code of CPC 1908 € has the implication of doing away from the need of going to the civil court for execution of the summons in cases of deliberate defiance by the summoned taxpayers.
However, it is still prevalent that even under GST regime and in cases where multiple thousand crores tax money has been siphoned off; the indirect tax officials are going to the courts for execution of summons leading to undue delay in investigation and additional expenditure. This is apparent because of inertia and lack of precedence. Hence, there is a need to exercise this new provision bestowing new powers to the indirect tax officials which can be eased if the CBIC issues such clear directions.
Further, there should also be exercised caution and restraint against frivolous use of this provision. This should be used after due justification and as a measure of last resort in cases of deliberate defiance of summons. It should not be used repeatedly as a weapon of attack upon the freedom of the taxpayer rather as a shield of protection for the law of the land.