CBIC issues New Guidelines for Custom Filed Formations to Balance Tax Evasion Investigations with Ease of Doing Business

The Central Board of Indirect Taxes and Customs (CBIC) has issued Guidelines for Customs field formations to maintain ease of doing business while engaging in investigation into tax evasion cases in import or export via issuing instructions.

The directive seeks to strike a balance between strict enforcement of customs regulations and minimizing disruptions to legitimate commercial activities in both the import and export sectors.

The new guidelines require Customs officers to take a more streamlined and transparent approach to their investigative processes, particularly in situations of suspected tax evasion. This includes implementing time-bound procedures, establishing clear documentation requirements, and providing regular updates to guarantee that investigations are completed on time. Furthermore, the guidelines emphasize the importance of avoiding unnecessary goods detention and lengthy procedures that may have a negative impact on compliant businesses.

The undersigned is directed to state that Customs field formations/customs houses frequently investigate cases of tax evasion in the import or export of products, also known as commercial intelligence/fraud (CI) cases. These cases are separate from what is commonly referred to as outright smuggling cases, which include contraband and other items. Because the import and export of goods via the filing of documentary declarations is also associated with doing business, the method of investigating Cl cases must strike a balance with ease of doing business.

Keeping important factors in mind, the Board wishes that Customs field formations/Custom Houses adhere to the following guidelines when conducting Cl investigations, subject to any legislative provisions or directives given in this regard.

Within the Commissionerate’s jurisdiction, the Commission (1) is in charge of developing and authorizing all intelligence, investigations, and their conclusion. Each investigation must be begun only with the Commissioner’s approval. A CI case investigation must be completed as soon as possible, typically within one year.

Before beginning an investigation, intelligence inputs and important aspects relating to Cl matters must be thoroughly reviewed. This includes cross-checking against available data, technical literature, established industrial practice, court pronouncements, the existing legal framework, precedent, and so on. Before beginning the actual investigation, it is preferable to conduct the most thorough study possible. This would also allow for the initial request of comprehensive information/records/documents relating to an issue, which is a crucial component in minimizing engagement with the importer/exporter.

The above-mentioned investigation should include evaluating open-source material and DIGIT and DIN records for previous investigations involving the same entity, as well as determining whether an investigation into the same issue exists.

The Commissioner may also assess whether commercial intelligence is actionable and should be brought to the attention of DRI. For example, it may have cross-jurisdictional implications. In such cases, the Commissioner shall direct that the jurisdictional Chief Commissioner bring it to the attention of the Pr. DG of DRI.

Even after the Commissioner has taken the first decision to undertake the investigation, the general principles of ease of doing business, including those based on common prudence, must be considered while conducting the investigation.

These include:

(a) As far as possible, documents may be sought preferably by writing a letter.

(b) In case summons have to be issued, the extant Instructions of CBIC (including F. No. 394/05/2015 – Cus (AS) dated 04.02.2015) including on the matter of issuing summons to senior management officials must be kept in view.

(c) The time frame specified for appearance, or producing information, should be reasonable and keeping in view the mode of communication of the letter/summon.

(d) Before seeking any information or documents, the relevancy and propriety of what is being sought shall be recorded (on e-file), ensuring that it is holistic and result of preparation, and also so as not to have repeated issuance of letter/summons or seeking of piecemeal information.

(e) In issuing letter/summons for information or documents the norm shall be of prior reasoned approval (of officer not below Dy/Asst. Commissioner level) of each content of the summons to be printed by the summoning officer.

(f) If the statement is recorded under summons, the scanned copy of such statement shall be uploaded in the same e-office file in which approval was obtained to issue summons. Outcome of search/inspection conducted, including panchnama or mahazar (where recorded), be also so uploaded. The e-file should be submitted for information to Addl./Jt. Commissioner at the earliest and in any case within 4 working days from date of statement, completion of search/inspection.

(g) The practice of taking into account appropriate difficulties or circumstances presented by the entity should be developed by the Commissioner. For example, there could be a need to take into account aspects such as location of entity’s personnel, etc.

(h) In seeking information/documents in Cl matters, the letter/summons should disclose the specific nature of the inquiry being initiated/undertaken. The vague (or general) expressions must be avoided.

(i) Wherever permissible, the officer indicates to the person summoned, the option to attend by an authorized agent.

(j) The documents which are specified in the summons to be produced, should be only those required for investigation. The summons should not require any document or thing to be produced in connection with the inquiry which is outside the scope of summons related to that inquiry. The scope of summons in Customs is in the wording of Section 108 of the Customs Act, 1962. Issuing letter/summons with context or content akin to a fishing inquiry is not acceptable.

(k) Information otherwise available, for example, e-sanchit documents, information on various departments’ online portals, etc. need not be routinely sought. Further, a letter/summons should not be used as a means to seek information filled in formats or proforma (specified by investigation).

(l) It is not necessary to keep investigation pending till limitation in law approaches. Moreover, the closure report consequent to the appropriate payment of government dues by the person concerned should also not be delayed and should have a brief self- explanatory narration of the issue and the period involved. Timely actions, i.e. without delay, at these stages are all part of preventive vigilance ensuring that no room remains for malpractices and this holds also for the aspect at (m) below.

(m) Conclusion of investigation also takes the form of recording that investigation is not being pursued further as nothing objectionable was found in terms of matter investigated.

Even after the Commissioner has taken the first decision to undertake the investigation, the general principles of ease of doing business, including those based on common prudence, must be considered while conducting the investigation.

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