Case Title: M/s. Marwadi Shares and Finance Ltd. Vs. Union of India & Ors.; Special Leave to Appeal (C) No(s). 27124/2023; Dated 15.12.2023
The Hon’ble Supreme Court issued a notice and stayed the variation of the earlier stay order, ensuring that the audit proceedings remain on hold.
Background: Marwadi Shares and Finance Ltd., a stock broker registered with the service tax department, received a notice for an audit to be conducted by the Central Excise Revenue Audit (CERA). The company challenged this notice before the Hon’ble Gujarat High Court. The challenge was based on the argument that Rule 5A of the Service Tax Rules, which permits such audits, is ultra vires the Finance Act. The petitioner relied on a decision by the Hon’ble Delhi High Court that deemed the rule unconstitutional.
Gujarat High Court’s Initial Ruling: The Gujarat High Court admitted the petition and stayed the audit proceedings. However, at the request of the Revenue, the High Court later allowed the audit to proceed but prohibited the finalization of the audit report, citing that the Hon’ble Supreme Court had stayed the Delhi High Court’s decision.
Supreme Court’s Intervention: Marwadi Shares and Finance Ltd. challenged this modification of the stay order through a Special Leave Petition (SLP) before the Hon’ble Supreme Court. The Supreme Court issued a notice and reinstated the initial stay, directing that the audit proceedings remain suspended.
This decision by the Supreme Court emphasizes the ongoing judicial scrutiny regarding the scope and application of Rule 5A of the Service Tax Rules and its alignment with the Finance Act.
The matter was argued by Ld. Counsel Bharat Raichandani.
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