CA Sumit Grover

Less than a week ago, CBEC had empowered CAs & CMAs(nominated u/s 72A) to conduct service tax audits on behalf of service tax department, by setting aside the verdict pronounced by Hon’ble Delhi High Court in case of  Travelite (India) Vs. Union of India & Ors., wherein the court took the view that the service tax audits are not backed by any statutory provisions, therefore rule 5A(2) of Service Tax Rules, 1994 is bad in law.

And accordingly amendment was introduced vide Notification No. 23/2014- ST dated- 05.12.2014, and rule 5A(2) was amended, the pronouncement of Hon’ble Delhi High Court was overlooked and CAs/CMAs were made authorized to conduct service tax audits.

Now, subsequently, clarification has been issued by CBEC vide Circular no. 181/7/2014- ST dated 10th dec’14, by drawing attention towards clause (k) to section 94(2),inserted vide  Finance Act,2014(applicable w.e.f. 6th Aug’14) which used the expression- “the manner in which records shall be verified”.

Department clarified that the words verification includes the audits as well.

Henceforth, the audits are now fully backed by statutory provisions.


It’s the never ending practice of the department to nullify the judicial pronouncements by amending the provisions. One thing is appreciable that they didn’t bring the amendment retrospectively.

One interesting point needs to be taken into consideration is that since the amended provision(referred in the circular) are applicable from 6th Aug’14, should it be interpreted that all the audits initiated prior to the said date, be declared as void? The department needs to be very cautious before bringing such amendments which might prove negative for them.

(Author can be reached at [email protected], +91-9910946323)

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October 2021