Tamil Nadu Government has recently issued guidelines - adjudication proceedings highlighting the qualities of a good order, show cause notice, proceedings etc. - GST - States - Circular No: 8/2024

GOVERNMENT OF TAMIL NADU COMMERCIAL TAXES DEPARTMENT EZHILAGAM, CHENNAI- 600 005 PRESENT: Dr. D.JAGANNATHAN I.A.S. COMMISSIONER OF STATE TAX Circular No: 8/2024 (A1/553/2024/Ease of Business Cell) Dated: 29.08.2024 Sub: Commercial Taxes Department Goods and Services Tax (GST) Acts - Adjudication proceedings - certain guidelines issued - regarding. A well-drafted GST order, issued by a proper officer, is an important component of fair and efficient Goods and Services Tax (GST) administration. Effective orders must demonstrate qualities such as clarity, transparency and adherence to the provisions of the GST Acts and Rules, 2017. The adjudication process is a holistic exercise of the application of laws and reflecting it properly in the notices and orders. Many times, because of hurried and poor drafting of notices and orders, various appellate forums and Hon ble High Court set aside such notices / orders, resulting in a loss of efforts and time of Proper Officers and revenue to the Department. Hence, the following guidelines are issued to make the adjudication process more transparent, reduce the litigations and realize revenue to the Exchequer. 1. QUALITIES OF A GOOD GST ORDER: (i) Clarity and Conciseness: It is of utmost importance to maintain clarity and simplicity while drafting GST adjudication orders. Usage of Clear and unambiguous language ensures that taxpayers can easily comprehend the officer s decision. Also avoiding unnecessary elaboration helps to maintain the focus on the core reasoning behind the orders enhancing its effectiveness and ensuring efficient communication of the decisions to the taxpayer. (ii) Logical Reasoning: A well-drafted GST adjudication order shall provide a logical and reasoned explanation for the decision arrived by the proper officer. It should meticulously detail the facts of the case, citing relevant legal provisions from the GST Acts and Rules and illustrating how those provisions were applied to the specific circumstances at hand. By doing so, the order establishes a clear and compelling rationale for the decision arrived in the adjudication process. (iii) Fairness and Impartiality: The order should be free from any bias or prejudice. The order should demonstrate a commitment to fairness and impartiality throughout. It should be evident that the decision was reached through a meticulous evaluation of all evidences and strict adherence to the GST Acts and Rules. (iv) Compliance with Legal Standards: The order should meticulously adhere to the legal standards and established procedures under the GST Acts and Rules. It should showcase the officer s comprehensive understanding and accurate application of relevant provisions in reaching a just outcome. (v) Consistency with Precedents: Consistency with prior judgements and the established legal principles related to GST arc crucial aspects of a well drafted adjudication order. This ensures coherence within the GST framework. This consistency not only enhances the credibility of the decision arrived by the proper officer but also provides clarity to the taxpayers and promoting confidence in them about the enactment of GST Acts. (vi) Clarity. on Remedies: If the order grants any remedies or reliefs (such as refunds, adjustments), it should clearly specify the nature and extent of those remedies. This includes details on refunds, adjustments or other forms of relief awarded. (vii) Just and Equitable Outcome: The order should provide a just and equitable resolution of all issues involved. It should carefully address the issues to achieve a fair and impartial outcome. (viii) Protection of Rights: A fundamental requirement of the order is to ensure the protection of rights and legal safeguards guaranteed under the GST Acts and the Constitution of India. (ix) Finality and Enforcement: The order should clearly state whether the order is subject to appeal and, if so, the timeframe for filing an appeal and the authority before whom the appeal is to be filed Additionally, the order should outline the mechanisms for enforcing its decisions, such as collection of taxes, interest and penalties or implementation of other directives. (x) Clarity on Costs: If the order includes any payment dues, it should transparently explain the methodology for calculating and determining those dues. (xi) Timeliness: A commendable order should be issued promptly after the conclusion of the proceedings. This minimizes uncertainties and delays for the parties involved. (xii) Correctness: Above all, the adjudication order must be legally sound. It should be a well-reasoned and accurate interpretation and application of the relevant provisions of the GST Acts and Rules specific to the case at hand. (xiii) Language and Structure: The order should be well-structured and utilize appropriate legal language and terminology to convey the message with utmost clarity and precision. A professional and respectful tone should be maintained throughout, avoiding dismissive or accusatory language. Conclusion: These qualities collectively contribute to a well-drafted GST adjudication order and a process that fulfills its purpose within the legal system. This ensures a fair, transparent and efficient GST administration. 2. ROLE OF ADJUDICATING AUTHORITY: As per Section 2 (4) of The Tamil Nadu Goods and Services Tax Act, 2017 adjudicating authority means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Commissioner, Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal. After issuance of Show cause notice, the adjudicating authority shall issue a speaking order after thorough verification of the written submission and supporting documents filed by the taxable person and subsequent discussions during the personal hearing by applying relevant statutory provision and by strictly adhering to the Principles of Natural justice. Principles of Natural Justice; There are mainly three Principles of Natural justice. These three principles are: i) Nemo judex in causa sua or Rule Against Bias This principle states that No one should be made a judge in his own cause . It means that a decision-maker must be impartial and unbiased while making a decision. The decision of adjudicating authority should not be biased or arbitrary. ii) Audi Alteram Partem or Rule of Fair Hearing This principle means hear the other party or No one should be condemned unheard . The grant of adequate opportunity of personal hearing is the primary responsibility of any adjudicating authority before deciding a case as per the statutory provisions of tax laws. The same should be real, reasonable and effective and not merely an empty formality. The rule of fair hearing encompasses several aspects which include the right to notice, adequate opportunity of being heard and right to present the case and evidence. iii) Rule of Speaking Order or Reasoned Decision The third principle of Natural Justice which has developed in course of time is that the order passed must be a Speaking Order or Reasoned Decision. When the adjudicating authority provides the reason behind their decision, the decision is treated as the reasoned decision. It is also called a speaking order. The taxable person must know why and on what grounds an order has been passed for/against him. This is necessary with a view to exclude the possibility of arbitrariness in the action. Once the taxable person had filed reply/objections pursuant to the show cause notice, it is the duty of the Adjudicating authority to pass a speaking order, providing reasons for rejection of the reply/objections raised by the taxable person. If any cryptic order is passed without touching upon the queries/contentions of the taxable person, ultimately, it will result in filing of writ petition under Article 226 of the Constitution of India, by the taxable person before the Hon ble High court. Therefore, the orders to be passed by the Adjudicating authority shall always be a speaking order. 3. GENERAL CONTENTS EXPECTED IN A SHOW CAUSE NOTICE: (i) Brief introduction about the taxable person and their nature of business. (ii) The period for which the proposed action and statutory provision (Relevant Section) under which notice is being issued has to be mentioned. The issue shall be properly demarcated for invoking Section 73 or Section 74 as the case may be, by the Adjudicating authority. Specific reference to reason of fraud or any wilful misstatement or suppression of facts shall be established in the notice for invoking Section 74 of the GST Act. (iii) The records or evidences which is relied on by the adjudicating authority for the proposed action has to be referenced. (iv) The self-declaration, if any, made by the taxable person to the department which is sought to be disagreed by the adjudicating authority has to be stated. (v) Detailed analysis of evidences/records based on which the proposed action is sought to be made. (vi) Conclusion of the adjudicating authority based on the analysis as stated above. (vii) Value of supply for which notice issued has to be mentioned and applicable tax, interest and penalty has to be quantified. Further HSN/SAC dealt by the taxpayer, for the respective commodity/service in which the discrepancy is pointed out must be clearly mentioned along with appropriate rate of tax. (viii) Arithmetic as well as logical calculation resorted by the adjudicating authority to arrive into the liability proposed has to be provided with reasonable clarity. (ix) If any additions or estimations based on best judgment of the adjudicating authority is made, the special circumstances and reasons which warrants such additions or estimation has to be spelt out. The Quantum of additions or estimation shall have a realistic bearing on the nature of irregularity detected, size of business etc. (x) The taxpayer shall be afforded with reasonable time to show cause against the proposal. (xi) The request of the taxpayer for perusal/obtaining copies of the documents or records relied by the authority for making such proposal shall be considered judiciously and allowed. Copies of documents relied on can be given along with the notice itself so as to avoid any delay. (xii) The request for cross examination of the witness, if any, shall be considered judiciously and allowed. (xiii) On completion of the above time limit, an opportunity of being heard in the matter shall also be given. (xiv) Request for adjournment of time and hearing shall be granted based on the merit of such requests. (xv) Where the adjudication provisions require that the taxpayer shall be given a reasonable opportunity of being heard, the provisions shall be followed in letter and spirit, by intimating the taxable person regarding the date, time and venue of hearing. It shall not be a vague intimation like the taxable person is at liberty to have hearing on any date, within the time stipulated for submitting the objections. 4. POINTS TO BE NOTED BEFORE ISSUANCE OF ORDERS: a. The Proper Officer shall ensure that all the components of natural justice, such as opportunity to show cause, grant of copies of documents relied on for assessment, cross examination of witnesses whose documents were relied on for making the assessment, opportunity of being heard in person, grant of reasonable time to file reply, requests for adjournment etc., are properly available in the adjudication process. The detailed guidelines already issued by the Principal Secretary/ Commissioner of Commercial Taxes in Circular No. 12/2022 dated 26.09.2022 relating to the adherence to Principles of Natural Justice in the adjudication process shall be followed in letter and spirit. b. The Proper Officer shall ensure that the request for appearance by authorized representative under Section 116 of the GST Act, 2017 are properly considered in the adjudication process. c. Once the taxable person has filed his objections, the authority shall carefully analyse the contentions raised by the taxpayer against the proposal and shall have a cross check with the facts already available. If any ambiguity in the taxpayer s contention needs further clarification, it can easily be done at the time of personal hearing. This would give a better understanding of the matter at his disposal. d. Subsequently, oral submissions made by the taxable person at the time of Personal hearing, if any, shall be reduced to writing by the authority by way of Record of Proceedings. Such Notes can be required to be authenticated by the taxable person which will be a token of proper hearing. Copy of such Record of Personal Hearing , signed by the Officer and Taxpayer/Authorised Representative, shall be retained in the Assessment records and a copy of it shall be shared with the taxpayer as well to ensure transparency. e. Circumstances may arise where the evidences or records produced by the taxpayer or otherwise, points toward enhanced liability than already proposed. In such circumstances, in accordance with GSTN system / back office provision, a separate notice shall be issued and all the safeguards and procedures taken for the original notices shall be followed. 5. POINTS TO BE NOTED WHILE DRAFTING THE ORDERS: The following guidelines are only illustrative in nature, not exhaustive and can further be elaborated depending upon the need and requirement of a given case:- a. Check the year for which notice has been issued. b. Check the documents and reply filed by the taxpayer to see that it represents to the relevant year. c. The records of notice issued, acknowledgments, adjournments, documents and evidences shall be marked and referenced. The references shall be chronologically quoted including the proposal notice, revised proposal notice (if any), reply to the proposals, evidences submitted, etc. d. Start with Brief introduction about the taxable person and their nature of business. The period for which the order has been issued and statutory provision (Relevant Section) under which action has been taken shall be mentioned clearly. e. Gist of the reasons for which the notice has been issued shall be narrated first. The main issues framed as per the proposal notice shall also be provided in detail. f. The date of filing of reply, the objections/contentions raised by taxable person, the date of awarding personal hearing and the details of oral submission put forth by him at the time of hearing have to be specifically mentioned in the order. The evidences or other documents, if any, adduced by the taxpayer shall be detailed out. g. Further, the contentions raised by the taxpayer against the issue raised in the proposal can be logically listed according to the facts of each case. Related issues have to be identified from the reply and evidences and need to be grouped together. It must be ensured that all the contentions raised by the taxpayer has been taken up and listed. h. After listing all issues to be decided upon, the adjudicating authority shall segregate the issues broadly in two categories:- (i) One category in which there is no dispute between Department and taxable person; and (ii) Other category in which the dispute between Department and taxable person persists. i. The issues, on which there is no dispute, may be summarized in one or two paragraphs of the findings. The remaining issues, where dispute between the Department and taxable person exists, shall be listed. At this stage, the sequencing of the issues is required to be considered carefully. j. Now, the issues listed can be taken up chronologically and answered one by one with consideration to the evidences, records and other documents already in possession. Resultantly, the finding is to be explicitly arrived and recorded. k. If any proceedings are made in pursuance of the directions of the Appellate Authority and Hon ble High Court, the fact of such directions and its applicability to the proceeding has to be provided in detail and acted accordingly. l. Value of supply has to be mentioned and applicable tax, interest and penalty has to be quantified. Further, HSN/SAC, for the respective Commodity / Service dealt by taxpayer in which the discrepancy is pointed out must be clearly mentioned along with appropriate rate of tax. m. The arithmetical calculation as well as logical conclusion based on which the issue is decided against the taxpayers has to be resorted to fix the liability of the taxpayer. Addition or Estimation, if any resorted shall be in tune with the facts of the case and not be too low or too excessive. The tabulation shall be descriptive enough. Anyone who goes through the tabulation must be able to understand the ratio / logic applied behind such fixation of liability. n. After preparing the draft, it is necessary to go through the same to find out, if anything, essential to be mentioned, has escaped discussion. o. The order shall have sustained chronology. It shall have flow and perfect sequence of events, which would continue to generate interest in the reader. p. Appropriate care shall be taken not to load it with all legal knowledge on the subject as citation of too many judgements creates more confusion rather than clarity. While citing any judgement, the latest judgement in which all previous judgements has been Considered shall be mentioned. Priority has to be given based on the hierarchy of orders issued (i.e.,) Hon ble Supreme Court of India, Jurisdictional High Court (High court of Madras). q. It must be specifically provided in the Order that the final liability fixed along with the interest shall be paid as per the Demand Notice attached. A Demand Notice requiring the taxpayer to pay the liability has to be attached along with the Order electronically. r. The order shall specify the Authority before whom an appeal can be filed and the time limit with in which it has to be filed. 6. GENERAL CONTENTS OF A MODEL ORDER ARRANGED IN LOGICAL SEQUENCE: a. Full address of the Authority including email and phone number. b. Statutory provision(s) which gives authority to pass the order. c. Quote the references (in chronological order) Eg. Returns/statement of accounts/audit reports /Reconciliation Statement etc. i. Notice for checking of accounts/audit. ii. Adjournment requests. iii. Adjournments granted. iv. External information received/ details of e-way bill. v. Statement recorded. vi. Extract /narration in accounts. vii. Invoices of Inward and Outward supply. viii. Inspection reports. ix. Cross examination request. x. Pre-assessment/penalty notices. xi. Replies filed by the taxpayer. d. Narrate the name and address, GSTIN, and brief business practice, person to whom the order is intended and the assessment year to which the order relates. e. The Adjudication order shall contain a bilingual preamble in Tamil and English for better understanding of the taxpayers (Model enclosed as Annexure) f. Narrate the contents of the notice. g. Narrate taxpayer s reply. h. Personal hearing and Record of personal hearing. i. Briefly discuss and decide on the issues conceded by the taxable person. j. Issues framed on matters in which there is difference between adjudicating authority and the taxable person. Connected issues to be answered along with the main issue. k. Discuss issue-wise along with evidence and facts. Judgments, if any cited, shall be discussed in depth relating to the issue. l. Furnish the tax liability calculation. Quantify the tax, interest and penalty payable by the taxable person. If tax demand is yet to be paid, interest may not be quantified as it will be accruing every passing day till the date of payment. Hence, as regards interest not quantified cases, a mention that Interest at applicable rates as per Section 50 (1) or (3) would be payable will be quintessential. m. Specify the Authority before whom an appeal can be filed and the time limit within which it has to be filed. 7. The above instructions are meant to be guidelines for Adjudicating Authorities and shall not be cited by any Proper officer as reference in the show cause notice or in any order. All Proper Officers shall follow the above guidelines. All Joint Commissioners and Deputy Commissioners shall supervise the compliance to above Guidelines. Detailed training and awareness shall be conducted among all officers of the Department through the Commercial Taxes Staff Training Institute / Regional Training Chapters. Sd/- D. Jagannathan, Commissioner of State Tax To The Additional Commissioner (Large Taxpayers Unit). All the Joint Commissioners (Territorial Intelligence). All the Deputy Commissioners (Territorial and Intelligence). All the Head of Assessment Circles in the State. All the Proper Officers in the State (through their Head of office). ANNEXURE GOVERNMENT OF TAMILNADU - DEPARTMENT OF COMMERCIAL TAXES PROCEEDINGS OF THE DEPUTY COMMISSIONER (ST)/ASSISTANT COMMISSIONER(ST)/ TAX OFFICER /DEPUTY STATE TAX OFFICER ___________ASSESSMENT CIRCLE Present : Thiru/ Tmt./ Selvi : . Office Address : . GSTIN : . Dated:. . Assessment Year: . . Sub: TNGST Act, 2017 and CGST Act, 2017 - Tvl.................................. GSTIN: . . Assessment Year . . under Section . . of the TNGST Act, 2017 and CGST Act, 2017- Form . . issued -regarding Ref: 1. This office notice in Form .......... dated......... 2. Reply letter filed by taxpayer dated.............. 3. First Personal hearing date.............. 4. .............. 1. An appeal against this order u/s 107 of TNGST Act, 2017 may be filed before the Appellate Authority........................within 3 months period from the date of receipt of this order. Order