GST Investigations - Dual Duel

OCTOBER 10, 2018

By Vijay Kumar

Both Central and State GST authorities can investigate assessees under each other's jurisdiction. One Nation, One Tax, Innumerable
Investigators

IN
July 2016, the then Member of the then CBEC (now CBIC) Mr. Ram Tirath declared that assessees under the GST will have to deal with only
one single authority.

A week later, in an article in the Hindu, Revenue Secretary Hasmukh Adhia and CEA Arvind Subramanian wrote:

Critics and taxpayers have viewed the dual structure with some anxiety, fearing two sources of interface with the tax
department and hence two potential sources of harassment. But dual monitoring should also be viewed as creating
desirable tax competition and cooperation between State and Central authorities. Even if one set of tax authorities
overlooks and/or fails to detect evasion, there is the possibility that the other overseeing authority may not.

Recently, the Andhra Pradesh State GST Chief Commissioner issued a Circular with this direction:

Hence all the Joint Commissioners (ST) are requested to initiate action against the tax payers allotted to Central Tax
Authorities in specific cases duly following the above mentioned decisions of GST Council and Coordination
Committee of State and Central Tax Authorities.

In  -2018-TIOL-2868-HC-ALL-GST, the Allahabad High Court observed,

Officers of State are also competent for search, seizure and imposition of penalty in respect of violation of Central
Enactments. Moreover, provisions relating to search and seizure are not for the purpose of imposition of a new
liability but to regulate fiscal statutory provisions in order to avoid evasion of tax

In Advantage India Logistics case - 2018-TIOL-2867-HC-MP-GST, the Madhya Pradesh High Court had also observed,Â

"we are of the view that officers appointed under the MPGST Act are authorized to be proper officers for the purpose
of IGST".

Recently - on 5th October 2018, the Member (GST) in CBIC, in a letter to all his Principal Chief Commissioners and other senior officers
stated:

It has been brought to the notice of the Board that there is ambiguity regarding initiation of enforcement action by the
Central tax officers in case of taxpayer assigned to the State tax authority and vice versa.

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 2. In this regard, GST Council in its 9th meeting held on 16.01.2017 had discussed and made recommendations
regarding administrative division of taxpayers and concomitant issues. The recommendation in relation to cross-
empowerment of both tax authorities for enforcement of intelligence based action is recorded at para 28 of Agenda
note no. 3 in the minutes of the meeting which reads as follows:-

"viii. Both the Central and State tax administrations shall have the power to take intelligence
-based enforcement action in respect of the entire value chain"

3. It is accordingly clarified that the officers of both Central tax and State tax are authorized to initiate intelligence
based enforcement action on the entire taxpayer's base irrespective of the administrative assignment of the taxpayer
to any authority. The authority which initiates such action is empowered to complete the entire process of
investigation, issuance of SCN, adjudication, recovery, filing of appeal etc. arising out of such action.

4. In other words, if an officer of the Central tax authority initiates intelligence

based enforcement action against a taxpayer administratively assigned to State tax authority, the officers of Central
tax authority would not transfer the said case to its State tax counterpart and would themselves take the case to its
logical conclusions.

5. Similar position would remain in case of intelligence

based enforcement action initiated by officers of State tax authorities against a taxpayer administratively assigned to
the Central tax authority.

6. It is also informed that GSTN is already making changes in the IT system in this regard.

Is the Dual control applicable only to intelligence based enforcement action? How will anyone know whether the enforcement action was
based on intelligence or whether it was a fishing expedition? The assessee is answerable (vulnerable) to both State and Central GST officers.
We have an army of tax officers and we are obliged to provide gainful employment to them.

What is the Difference Between Intelligence and Information?

A former DG of the Directorate of Revenue Intelligence once told me,

"I never depended on the intelligence or the lack of it of the Commissioners."
We have several Intelligence agencies, all busy gathering intelligence. But what is intelligence? What is the difference between Intelligence
and Information?

The Central Excise Intelligence and Investigation Manual issued by the Directorate General of Central Excise Intelligence in 2004 states:

the task of collection, compilation and analysis of Intelligence and undertaking proper investigation becomes
extremely critical. The agencies and the officers who are entrusted with such task should equip themselves with
necessary knowledge and skill. The success of an efficient intelligence agency rests upon making full use of the
potential of the automation and related technologies.
Thorough and up-to-date knowledge of law and procedure is also the necessary pre-requisite for the investigating
officers.

The Manual further states,

Intelligence, in law enforcement parlance, has multiple meanings. It is used to describe an activity or process by
which information relating to likely events/offences is collected. The term is also used to describe the end product of
this process. The "intelligence product" is one which is of direct value for operationalization. Besides, the term is also
used to describe the organizations involved in this activity. Simply stated, an intelligence is processed information
. The activity entails assembling of information, collating and evaluating it and finally putting it to timely use.

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 The product resulting from collection, evaluation, analysis, integration of available information which concern with
one or more aspect of a tax evader, is intelligence with reference to tax law enforcement.

So, every piece of information is not intelligence. If somebody tells you that GST is a Godforsaken Stupid Tax, this may be an opinion or
information, but certainly not intelligence.

The Central Excise Intelligence Manual further explains:

An actionable intelligence product emerges from a cycle acronymed CECARD i.e.

Collection,

Evaluation,

Collation,

Analysis,

Reporting and

Dissemination.

Information is collected from various covert and overt sources e.g. informer, newspapers, correspondences, company records etc. Such
information is then evaluated particularly with reference to reliability of source and accuracy of information. The next step, collation, is to put
the pieces of information together and transform it by arranging, sorting etc. into a logical & usable data. The logical and usable data is then
analysed, gaps filled by further development and intelligence is finally brought to usable form. The analysed and usable intelligence is reported
to the appropriate level to take a decision regarding operationalisation of intelligence i.e. date, time, units to be involved in operation etc.
Finally, the intelligence is disseminated to the operational unit. The process can be represented as a series of logical successive phases which
is not necessarily carried out ponderously step by step but may be the result of rapid mental activity.

Do you need to be intelligent (naturally or artificially) to be an intelligence officer? Even the DG, DRI was not willing to depend on the
intelligence of his senior officers!

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