The GST Council has issued an Office Memorandum (OM) dated 19/10/2022 pertaining to clarification on the Authority regarding Show Cause Notice (SCN) and recurring SCN in case of Central enforcement action against a taxpayer assigned to State and vice versa.
To ensure consistency in the process followed by field formations, the said OM of GST Council clarified that a taxpayer located within a State is subject to enforcement action by both State and Central Tax authorities, and that all subsequent action relating to the case, including, but not limited to, appeal, review, adjudication, rectification, and revision, will be vested in the authority that initiated the initial enforcement action. It also clarifies that the issuance of recurring SCNs does not require a new investigation because the subject matter and ground of SCN remain the same, and thus the recurring SCNs may be issued by the concerned jurisdictional tax authorities administering the taxpayer because they will have access to the taxpayers’ records and returns.
GST Council Office Memorandum dt. 19/10/2022: Clarification on the Authority regarding Show Cause Notice (SCN) and recurring SCN in case of Central enforcement action against a taxpayer assigned to State and vice versa
Field formations use a variety of practises when issuing recurring Show Cause Notices (SCNs) and other consequential actions in cases where an investigation has been initiated and completed by Central tax authorities in respect of taxpayers under State tax Administration and vice versa. In some cases, the authority that initiates the investigation also issues recurring SCN, whereas in others, the concerned jurisdictional Tax authority that administers the taxpayer is responsible for issuing recurring SCN. This may cause confusion and lead to a situation in which none of the authorities issue the recurring SCN in a timely manner; thus, a uniform practise in such matters is required.
The GST Council discussed the issue at its 47th meeting, and the Council recommended clarification on the following liness:
i) A taxpayer residing within a State may face enforcement action from both authorities. For example, the Central tax authorities may initiate an enforcement action against a taxpayer who has been assigned to State tax authorities (and vice versa). In such cases, the authority that initiated the enforcement action, in this case the Central Tax Authorities, will be responsible for all subsequent actions relating to the case, including, but not limited to, appeal, review, adjudication, rectification, and revision.
In such cases, a refund may be granted only by the jurisdictional tax authority that administers the taxpayer.
ii) Issuance of recurring SCNs does not require a new investigation because the subject matter and ground of SCN remain the same, and thus it may be preferable that such further/recurring SCNs be issued by the actual jurisdictional authorities (which is responsible for assessing taxpayer returns), as they will be able to access the taxpayers’ records and returns and check whether the grounds of SCN still exist or not and take a decision.
Furthermore, if the same authority that has taken enforcement-based action (but does not administer the said taxpayer) is mandated to issue recurring SCN, it will place an unnecessary burden on the investigating tax authority to keep track of the taxpayer’s subsequent practise after the investigation is completed and to collect all the data and records for issuance of recurring SCN.
As a result, the recurring SCNs may be issued by the concerned jurisdictional tax authorities administering the taxpayer, i.e., even if the investigation is conducted by Central tax authorities and the initial SCN is issued by them, the recurring SCN may be issued only by the jurisdictional tax authority administering the taxpayer, and if that jurisdictional tax authority is a State tax authority, the recurring SCN may be issued by the concerned State tax authority.