Chartered Accountants Association, Surat

Ref: CAAS/Representations/2024-25/02 Date: 21-01-2024

To,
Commissioner of State Tax (Gujarat), Rajya Kar Bhawan,
Near Times of India Office, Ashram Road,
Ahmedabad – 380009

Sub: Follow-up on Unscrupulous practices by SGST Officials to harass stakeholders Reminder – I

Ref: Our Representation dt.20-01-2024 and Meeting with Addl Commissioner on 05-02-2024 at Surat

Respected Sir,

With reference to the above captioned subject and as a follow up to the representation made exactly 7 months ago, titled "Unscrupulous practices by SGST Officials to harass stakeholders", pursuant to which our Association's meeting was scheduled at Surat, Bahumali Bhavan on 05- 02-2024, where in a detailed outline of the weaknesses in internal control of the SGST Department was discussed, besides clarifying that the letter dt.20-01-2024 was pertaining not only to areas of Surat, but to the whole of Gujarat, based on the samples and instances gathered by us. Additional Commissioner (who had chaired the meeting in place of Commissioner of State Tax), had patiently listened to us in a 2.5-hour long meeting, and acting under the authorisation of Commissioner of State Tax, had assured us, that certain follow up actions based on our feedback shall be taken soon.

After a passage of 7 months, we wait for the said assured feedbacks in the areas of Registration, Refund, Assessment and Appeals under SGST.

Our Representation:

1. Registration and Refunds:

Based on our representation, the Additional Commissioner, had assured us under the authorisation of Commissioner of State Tax, during the meeting that an aging mechanism for applications of registration and refunds is being implemented throughout Gujarat. However, still the registrations are being issued and refunds are being granted after the statutory period of 30 days and 60 days respectively across Gujarat, except Surat. We were requested to provide instances for the cases where harassment resulting from delay and red-tapism with the sole intention to receive alms by monetizing the situation. However, it is pity that despite implementation of aging mechanism across Gujarat by the department to filter out instances of deliberate delays, such information is already available with the department as custodians of information under Right to Information Act. However, whenever such issues in general are pointed out by us, such lame information about specific instances is sought from us.

It is worth noting that despite implementation of GST Seva Kendra for registration purposes, the registrations are being held up till 30th day, after which queries are generated, resulting into either further delay in registration or rejection of the application. It is noteworthy that here the SGST department is infringing upon the fundamental rights of the citizens enshrined in the constitution under Article 19(1)(g) to practice any profession, or to carry out any occupation, trade or business, by delaying and denying the eligibility to do business or practice profession.

In this regard, it is also worth noting that vide Notification No.16/2020 – Central Tax dt.23-03-2020, GST registration based on Aadhar Authentication was notified. Later vide Notification No.94/2020 dt.22-12-2020, w.e.f. a date to be notified, few amendments were related to bio-metric authentication. Further vide CGST (Fifth Amendment) Rules, 2022 dt.26-12-2022 w.e.f. 26-12-2022, the following additional clause in Proviso to Rule 9(1) was inserted:

"(aa) a person, who has undergone authentication of Aadhaar number as specified in sub-rule (4A) of is identified on the Common Portal, based on data analysis and risk parameters, for carrying out physical verification of places of business; or"

The issuance of GST Registration based on Aadhar Authentication was a welcome move, however after notification of the above Clause (aa) of Proviso to Rule 9(1), the misuse of discretionary powers by the Proper Officers while issuing GST registration has increased. It is worth noting that the amendment was brought to bring ease of doing business and reduce the time for issuance of new GST Registration to 7 days. However, GST is seldom issued in 7 days without disbursal of alms. The reason citing data analysis and risk parameters are arbitrary and in the result most cases are placed under High-Risk Category based on discretion, thus giving rise to corruption. At present when we state that a number is issued well within statutory timeline of 30 days, it is a legal statement which comes with embarrassment. The said time limit is already unjust and lengthy period to start a new business, when opportunity has struck. The statutory time limit to issue the number is 30 days which is in almost all cases fully utilized, instead of GST department issuing registration through goodwill.

World is looking towards India to set up new businesses in India. However, with this attitude that registrations are issued well within 30 days is a dark spot on the concept of ease of doing business. When compared to issuance of business registrations in other countries, like UAE and Hong Kong, registrations are issued in matter of minutes. However, on can only wonder, what special investigation goes on to issue GST registration, when investigations under Income Tax Act are also completed within couple of days.

Also, the officers are holding up registration just because of site verification for which they have found a new avenue to seek alms. Based on the survey made in the Gujarat, at present the following is the outcome of alms sought:

Also, the alms in appeals have the following rates:

• Related to rejection of refund matters: 10% of the disputed amount

• Related to movement of Goods in transit detained u/s 129: 20% of the disputed amount

It is also worth noting that although hearing for the appeals have not started for any of the matters, a few appeals related to movement of goods in transit detained u/s 129 had been taken in an out of turn fashion, arbitrarily.

As can be seen that the discretionary powers under registration, refund and assessment processes are yielding higher corruption levels.

We demand that based on such aging of registration and refund applications, instances where delay had been caused, be investigated and the culprits who are repeated harassers and seekers of alms, be weeded out of the system. The stakeholders do not pay for such lethargic and problematic government servants, who have chosen to become seekers of alms.

2. Appeals:

In an utter state of anarchy, a mountain of First Appeals has piled up. Still, the SGST department has neither came out of its slumber nor has not sunken in embarrassment, that despite celebrating the passage of 7 years of GST implementation, even the first of First Appeals have not been heard (excepting out revocation of registration and refund).

It is worth noting that this pile up of First Appeals is deliberate one. A deliberate attempt is being made to delay the First Appeals and choke the stakeholders to choose between litigation or settling the assessments by paying of alms. Also,

the deliberate attempt to not start hearing the First Appeal is to keep the fact covered-up that humungous number of assessments are finalized "without application of mind", where the seekers could not fetch the desired alms.

It is worth noting that as per Section 107(13), the Appellate Authority "shall", wherever it is possible to do so, hear and decide every appeal within a period of 1 year from the date on which it is filed. It is cardinal for the Appellate Authority to hear and decide every appeal, and it is also practically possible to dispose of the appeals filed till date, still the Appellate Authorities across Gujarat have failed to perform their statutory duties, infringing upon the rights of citizens, who are wronged, to avail a legally binding remedy against the said wrong.

We demand that the hearing for the First Appeals be started immediately with effect from 1st September 2024, failing which constitutional remedies under Article 226 shall be pursued.

3. Assessments:

31st August is the last date to pass orders for DRC-01 issued under Section 73 for FY 2019-20. Being the earning season, a repeated behaviour amongst the officers could be seen which we had informed in our last representation.

In the course of number of assessment proceedings where stakeholders were asked to visit the officer and where all relevant information was already submitted online, the concerned officers had passed high pitched orders in lakhs and crores of rupees without application of mind. There is no mandate under

CGST Act or Rules to visit the office in any assessment proceedings. In the absence of SOP for personal hearing, the said facility is being misused, to arrange session for seeking alms, and any waiver for Personal Hearing by the taxpayer is viewed adversely. Also, there are number of instances where tax payers are instilled with fear of penalty and interest, by calling directly over the phone to visit the SGST Office, without any official communication.

Also, another misuse of the powers can be seen when officers are taking advantage of yet to be issued notification by SGST, Gujarat for the amnesty scheme declared in the Budget and assented by the President on 16th August 2024. Under the said scheme any tax paid by the taxpayer u/s 73, shall not be followed up with penalty or interest. Although the notification for CGST has been issued on 16th August 2024, corresponding notification under SGST is not yet issued. To misuse this situation, the taxpayers are informed to gratify the officer, who shall not pass the order of penalty and interest on matters covered u/s 73, which eventhough he was not entitled to pass.

Officials, on being confronted with the question of why such high-pitched orders were passed without considering submission on record, the officials have taken the matter casually and asked the registered persons to file an appeal. Ironically, the appeal under GST is a farce and has become a laughing stock, with number of appeals whose first hearing has not been initiated even after the passage of more than 5 years of filing. Also, it not feasible to file appeals for petty matters.

Further, during our last meeting with the Additional Commissioner dt.05-02- 2024, instances of such high-pitched assessment were asked for. Instances from across Gujarat were provided where the assessment was completed without application of mind.

It is worth noting that a GST Officer or legally called "Proper Officer" under GST is a quasi-judicial authority and not an ordinary officer. While forming an opinion on the assessment, he has to apply his judicial mind. But, as already appraised to the Additional Commissioner, it is observed that incompetency of the officers, has not been taken care of till date by the SGST Department. CAAS as an Association, had even volunteered to train the officers where they lack the knowledge of legal framework under GST. The said offer had also not been taken up by the department.

Now it is learnt that it is neither the ignorance nor the incompetence of the proper officers, but a deliberate action to play along as incompetent, so that the botheration for intricate task of Assessment involving match-mismatch, compilation, comparison and confirmation involved in the GST assessment need not be taken at all. Officers who have been furnished with full assessment replies online on GSTN Portal, and emails do not take the pain to apply the mind, based on the written and exhaustive explanations given by the stakeholders. The officers have been found to be highly deficient in technical knowledge of GST, knowledge of legal language and also are highly deficient in analytical skills. This fact was already informed to the Additional Commissioner  during our last meeting, but despite passage of 7 months, situation has not improved yet.

This deliberate attempt to remain ignorant and incompetent is to churn out the opportunities to seek alms by monetizing the situation. The most woeful situation is when, the cases with cleanest of affairs under assessment are charged with alms amounting to Rs.15000 to Rs.25000, as a standard alms rate. When these demands are not met, the case is deliberately spoiled by the proper officer with shocking tax liability, which may be beyond the dreams of the taxpayer on whom it is imposed.

Now, when the upcoming deadlines for completing the assessment is nearing, there is a huge rise in high pitched assessment by the proper officers, without applying mind. Surprisingly, the said proper officers are themselves creating an official history and a trail of high-pitched assessments without application of mind, which is self-explanatory evidence to point out blackmailing and harassment of the stakeholders. It is not that the officers do not apply mind, but apply the mind in the wrong manner.

It is interesting to note that high-pitched assessment is a word which was first used under Income Tax, where high pitched assessment is possible. Under GST, unless the case involves bogus billing, there are no chances of high-pitched assessment except in case involving question of law. Still, it is shocking to see that high-pitched assessments are being made, which finally is a futile exercise but thus wasting time and effort of the stakeholders and also of the Government.

As under Income Tax, the appellate mechanism under GST is similar with similar hierarchy. Under Income Tax, the condition for pre-deposit of taxes prior to filing of appeal is neither discretionary i.e. not compulsory, nor even linked to appeal. However, under GST, the precondition of payment of 10% of the taxes involved (even if the order is passed without application of mind) is mandatory, for an appeal to be accepted. Unlike Income Tax, where only the profit is taxed, under GST the tax alleged to have been evaded is on the turnover or purchase, which calculates to a sizeable amount of the working capital of any tax payer. Not only such high-pitched assessments, add to the misery of the tax payers, but also whittles away the Gross GST Collection amounts declared each month by the Ministry of Finance, as highly fictitious figures, since later someday, these wrong high-pitched assessment demands have to be reversed. All this never add up for the benefit of the nation.

This condition of pre-deposit acts as a deterrent to the harassed stakeholders to refrain from preferring the first appeal. Infact, it is a violation of the fundamental right to have constrained remedy against a wrong. Due to the said constraint of pre-deposit, coupled with the discretionary powers of the proper officers to arbitrarily pass high pitched assessment orders for tax and penalty, corruption is cultivated in huge quantities. Also, under the Income Tax Act, high-pitched orders are transferred to High-Pitched Committee, however, under GST there is no such committee, but only the inert First Appellate Authority.

We demand that:

i. A departmental instruction be sent to the field formations, not to meet or compel to meet the stakeholders in the course of or in connection with the assessment proceedings, and all matters related to the assessment to be resolved either through GSTN Portal or through email only.

ii. Since a chaos has been created due to piling up of appeals due to the failure of SGST Department to hear appeals since last 7 years and which in turn has created situation conducive of rampant corruption and blackmailing, the requirement of pre-deposit of 10% of should be waived off for all the appeals cases atleast for 3 years or until the disposal of appeals for and upto FY 2022-23 are disposed of, whichever is later.

iii. The hearing for the First Appeals be started immediately with effect from 1st September 2024.

iv. A high-pitched assessment committee be formed immediately, to identify the root cause of such high-pitched assessment orders, and to provide for relief and remedy where such mindless high-pitched orders are passed to grant stay of demand.

v. Cases to be identified where high-pitched assessments are made without application of mind, and such quasi-judicial officers who ought to have taken and made best use of their unutilized minds, be weeded out with appropriate and exemplary disciplinary action, besides revoking such high-pitched assessment orders.

4. Movement of Goods:

It seems, that the laws and Constitution of India do not work, in a jungle-raj in the middle of the night, when the Proper Officer(s) take undue advantage of the transporters and registered persons, by exploiting and monetizing the situation to glean up alms. Any arguments of GST Law, notification, innocent error or omission in e-way bills do not suffice in front of the overpowered and high-head proper officers.

It is to be noted that as per Sec.68(3) read with Rule 138A(1), the person in charge of the transportation shall carry during transit and is obliged to provide only the following:

(1) Invoice / Bill of Supply / Delivery Challan

(2) A copy of E-way Bill

(3) In case of import, Bill of Entry

However, keeping aside all the above law and rules, a number of unwanted documents are asked for by the Proper Officer outside his authority including, invoices of previous owner and even previous to previous owner of goods, from where the goods had originated. Such issues are pure harassment and is a white-collar loot.

We demand that any such behaviour which affects the interstate trade or commerce or transit of goods be identified and taken appropriate punitive steps against the officer, who obviously does not thus seem to have been acting in good faith u/s 157, failing which it shall be treated as an infringement of:

• Article 19(1)(d) – Right to move freely throughout the territory of India;
• Article 19(1)(g) – Right to practice any profession, or carry on any occupation, trade or

We hope that you would take a prompt action in the above matter.

Thanks & Regards,

For Chartered Accountants Association, Surat.

President | Secretary

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