Service Tax Department Cannot Conduct Audits of Assessees: HC

By TG Team Service Tax Featured , Judiciary June 3, 2016 1 comment

TaxGuru Citation: 2016 taxguru.in 397
Case Name: Mega Cabs Pvt. Ltd. Vs Union Of India & Ors. (Delhi High Court)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Courts: All High Courts, Delhi High Court

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Delhi High Court has held as Under after hearing the revenue and assessee and considering their submissions :-

Resultantly, the Court:

(i) declares Rule 5A(2) as amended in terms of Notification No. 23/2014- Service Tax dated 5^thDecember 2014 of the Central Government, to the extent that it authorises the officers of the Service Tax Department, the audit party deputed by a Commissioner or the CAG to seek production of the documents mentioned therein on demand is ultra vires the FA and, therefore, strikes it down to that extent;

(ii) holds that the expression ‘verify‘ in Section 94 (2) (k) of the FA cannot be construed as audit of the accounts of an Assessee and, therefore, Rule 5A(2) cannot be sustained with reference to Section 94(2)(k) of the FA.

(iii) declares the Circular No. 181/7/2014-ST dated 10^th December 2014 of the Central Government to be ultra vi res the FA and strikes it down as such.

(iv) quashes the letter dated 30^th April 2015 issued by the Commissioner of Service Tax, Audit-1, New Delhi addressed to the Petitioner as being unsustainable in law.

(v) Declares that the CBEC Circular No. 995/2/2015-CX dated 27^th February 2015 on the subject ^‘Central Excise and Service Tax Audit norms to be followed by the Audit Commissionerates^‘ and the Central Excise and Service Tax Audit Manual 2015 issued by the Directorate General of Audit of the CBEC are ultra vires the FA, do not have any statutory backing and cannot be relied upon by the Respondents to legally justify the audit undertaken by officers of the Service Tax Department.