The Directorate of Revenue Intelligence (DRI) has started sending summons to a number of exporters. Asking them to appear in person before it, along with details of import made under advance authorisations for availing of exemption from the Integrated Goods and Services Tax (IGST) and Compensation Cess (CC) under notification 79/2017-Customs dated October 13, 2017.
These summons defy instructions of the Central Board of Excise and Customs (CBEC), now known as the Central Board of Indirect Taxes and Customs.
The said notification, 79/2017, allows exemption from IGST and CC on goods imported under advance authorisations, subject to the conditions of pre-import and physical export. DRI has taken a view that the exemption is not available where export under a particular advance authorisation precedes import. Also, that no exemption is available where any deemed export was made in discharge of an export obligation against the advance authorisation.
DRI also says an advance authorisation cannot be bifurcated or compartmentalised to make a portion of it conform to the pre-import condition and the rest otherwise.
Its rigid views might not be upheld by courts. The expression ‘pre-import’ is not defined anywhere. Most exporters understand the pre-import condition to mean that the imported goods must be used for manufacture of goods that must be exported. Also, many authorisations were issued before the said notification, 79/2017, where a part-export obligation had already been fulfilled and the advance authorisation scheme did allow discharge of an export obligation by supplies to other advance authorisation holders.
Through its letter F No 137/39/2007-CX-4, dated February 26, 2007, the CBEC had instructed that in calling for information or documents, the normal mode of communication should be either via a telephone call or by sending a simple letter.
Issuance of summons, it had stressed, should be resorted to only when the above-mentioned modes of communication are found to be ineffective or likely to jeopardise the revenue interest. Or when it is essential to ensure the personal presence of the person concerned. For instance, CBEC’s letter F No 208/122/89-CX.6, dated October 13, 1989, instructs that a summons be issued only as a final resort, in cases where assessees are not cooperating or investigations are to be completed expeditiously.
Also, the power to summon should not be used for harassing the top management for forcing it to pay up on demands which are being disputed by them. For recovery of a tax demand, normal procedure under the law should be followed. CBEC Instruction F No 207/07/2014-CX-6, dated January 20, 2015, says a summons need not be issued when a simple letter, politely worded, can serve the purpose of securing documents relevant to the investigation. The use of summons, it emphasised, should be a final resort, when it is absolutely required.
The government’s talk on ease of doing business and a non-adversarial tax regime sound hollow when any investigating officer can disregard such instructions and go on a fishing expedition, demanding a large number of both relevant and irrelevant documents, summoning exporters at will and as the first resort.