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Troubled by complaints about alleged coercive action by tax inspectors, the Central Board of Indirect Taxes and Customs (CBIC) has warned of disciplinary action against officials facing complaints of high-handed behaviour.

In an instruction issued to officials on Wednesday, CBIC clarified that recovery of tax dues can be made only after issuing a notice and an adjudication order.

The tax authority said no recovery can be made unless the amount becomes payable as per an order issued by the adjudicating authority or otherwise as per law. That is, there may not be any situation where the “recovery" of tax dues has to be made by the tax officer during a search or investigation on account of any issue detected during the process.

CBIC advised senior field officers such as principal chief commissioners and Directorate General of GST Intelligence (DGGI) to inquire into any taxpayer complaint about the use of force or coercion by any of their officers at the earliest. “In case of any wrongdoing on the part of any tax officer, strict disciplinary action as per law may be taken against defaulting officers," the tax authority said in the instruction. Mint has seen a copy of the communication.

An email sent to CBIC on Thursday seeking comments for the story remained unanswered at the time of publishing. CBIC also explained in the instruction that the law does not prevent taxpayers from making a voluntary payment of any liability and the tax officer needs to inform taxpayers of provisions regarding voluntary tax payments.

Tax professionals said the CBIC instruction to officials will reassure taxpayers and comes as a relief. “CBIC has clarified that no tax officer has a right to coerce a taxpayer to pay taxes during the course of inspection or investigations. This instruction would go a long way in easing the investigations if followed in letter and spirit," said Rajat Mohan, a partner at AMRG Associates, an accounting firm.

The move comes in the context of complaints by taxpayers who have voiced protest against alleged coercion by tax inspectors during searches, some of which have reached courts. The government has been stepping up its tax compliance drive by using technology to match the information reported by different entities in the supply chain, pre-filling tax return forms and restricting tax credits where reporting obligations are not met. It has also recentlyconducted several searches in cases where irregularities in tax credit usage have been suspected. This, along with economic recovery from covid, has helped GST collections to hit a record 1.68 trillion in April.

The CBIC clarification will boost business confidence and give taxpayers a fair opportunity to represent the issue before adjudicating and appellate authorities, said Abhishek A Rastogi, a partner at law firm Khaitan and Co. Rastogi has argued several writ petitions in courts against alleged coercive recovery by tax officers.

Rastogi said some online gaming companies, a food and beverages chain, and some firms in the denatured ethyl alcohol industry had moved court alleging coercive action.

“As it is clearly provided that strict disciplinary action will be taken, it is hoped that during the investigation, taxpayers are not forced to pay as voluntary tax payments," said Rastogi.

Earlier this month, CBIC chairman Vivek Johri advised field officers involved in issuing quasi-judicial orders and those involved in the review process to ensure that judicial discipline, the rule of law and due process are followed.

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