The Hon’ble Delhi High Court in the case of M/s Vianaar Homes Pvt. Ltd [W.P.(C) 2245/2020 & CM APPL. 7832/2020 dated November 3, 2020] has held that Section 174(2)(e) of the Central Goods and Services Tax Act, 2017 (CGST Act), specifically empowers the authorities to institute any investigation, inquiry, verification, assessment proceedings, adjudication, etc. including service tax audit under Rule 5A of the Service Tax Rules, 1994 (Service Tax Rules), as said Rule framed under the repealed or omitted chapter V of the Finance Act, 1994 (Finance Act”), is saved.
M/s Vianaar Homes Pvt. Ltd. (“Petitioner”) is a company engaged in the business of construction of residential complexes since its incorporation. The officers of Central Goods and Service Tax, Audit-II (“Respondents”) visited the business premises of the Petitioner, directed the production of certain documents and sought information in relation to the disputed period i.e. 2014-15 to 2016-17 (upto June, 2017)
In addition, thereto, the officers also demanded information pertaining to several group companies of the Petitioner. Despite Petitioner’s compliance with the above and submission of the requisite information, the officers visited the business premises again. Their conduct exhibited the intention to continue with the visits, conduct audit/verification proceedings, and give further directions for production of documents and information.
The Petitioner has challenged the letter dated November 11, 2019 by virtue of which the Respondents have commenced the audit/verification, on the ground that the same is void ab initio, being wholly without jurisdiction as well as without any statutory or legal authority.
Whether the audit/verification by revenue, contemplated under Rule 5A of Service Tax Rules, is saved despite the repeal of Chapter V of the Finance Act.
The Hon’ble Delhi High Court in W.P. (C) 2245/2020 & CM APPL. 7832/2020 dated November 3, 2020 held as under:
The Hon’ble Gujarat HC in in Oil Field Warehouse and Service Ltd v. Union of India [Special Civil Appeal No. 16232 of 2018 dated 17.10.2018] stayed CAG audit of a private limited company providing warehouse and logistical support services in SEZ, after observing that as per Section 174(2) of the CGST Act, prima facie, show that there was no saving of Rule 5A of the Service Tax Rules in such manner that fresh proceedings for audit could be initiated in exercise of powers under the said Rule. The Court stated that they have serious doubts whether, with the aid of rule 5A of the Service Tax Rules, the CAG can carry out compulsory Service Tax audit of private agencies like the petitioner.
Section 6 of the General Clauses Act:
“6. Effect of repeal.—Where this Act, or any [Central Act] or Regulation made after the commencement of this Act, repeals any enactment hitherto made or hereafter to be made, then, unless a different intention appears, the repeal shall not-
(a) revive anything not in force or existing at the time at which the repeal takes effect; or
(b) affect the previous operation of any enactment so repealed or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any enactment so repealed; or
(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any enactment so repealed; or
(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid,
and any such investigation, legal proceeding or remedy may be
instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed as if the repealing Act or Regulation had not been passed.”
Section 24 of the General Clauses Act:
“24. Continuation of orders, etc., issued under enactments repealed and re-enacted. —Where any Central Act or Regulation, is, after the commencement of this Act, repealed and re-enacted with or without modification, then, unless it is otherwise expressly provided any appointment notification, order, scheme, rule, form or bye-law, made or issued under the repealed Act or Regulation, shall, so far as it is not inconsistent with the provisions re-enacted, continue in force, and be deemed to have been made or issued under the provisions so re-enacted, unless and until it is superseded by any appointment notification, order, scheme, rule, form or bye-law, made or issued under the provisions so re-enacted and when any Central Act or Regulation, which, by a notification under section 5 or 5A of the Scheduled Districts Act, 1874, or any like law, has been extended to any local area, has, by a subsequent notification, been withdrawn from the re-extended to such area or any part thereof, the provisions of such Act or Regulation shall be deemed to have been repealed and re-enacted in such area or part within the meaning of this section.”
Section 174 of the CGST Act:
“174. (1) Save as otherwise provided in this Act, on and from the date of commencement of this Act, the Central Excise Act, 1944 (1 of 1944.) (except as respects goods included in entry 84 of the Union List of the Seventh Schedule to the Constitution), the Medicinal and Toilet Preparations (Excise Duties) Act, 1955, (16 of 1955.) the Additional Duties of Excise (Goods of Special Importance) Act, 1957, (58 of 1957.) the Additional Duties of Excise (Textiles and Textile Articles) Act, 1978, (40 of 1978.) and the Central Excise Tariff Act, 1985 (5 of 1986.) (hereafter referred to as the repealed Acts) are hereby repealed.
(2) The repeal of the said Acts and the amendment of the Finance Act, 1994 (32 of 1994.) (hereafter referred to as “such amendment” or “amended Act”, as the case may be) to the extent mentioned in the sub-section (1) or section 173 shall not-
(a) revive anything not in force or existing at the time of such amendment or repeal; or
(b) affect the previous operation of the amended Act or repealed Acts and orders or anything duly done or suffered thereunder; or
(c) affect any right, privilege, obligation, or liability acquired, accrued or incurred under the amended Act or repealed Acts or orders under such repealed or amended Acts:
Provided that any tax exemption granted as an incentive against investment through a notification shall not continue as privilege if the said notification is rescinded on or after the appointed day; or
(d) affect any duty, tax, surcharge, fine, penalty, interest as are due or may become due or any forfeiture or punishment incurred or inflicted in respect of any offence or violation committed against the provisions of the amended Act or repealed Acts; or
(e) affect any investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and any other legal proceedings or recovery of arrears or remedy in respect of any such duty, tax, surcharge, penalty, fine, interest, right, privilege, obligation, liability, forfeiture or punishment, as aforesaid, and any such investigation, inquiry, verification (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings or recovery of arrears or remedy may be instituted, continued or enforced, and any such tax, surcharge, penalty, fine, interest, forfeiture or punishment may be levied or imposed as if these Acts had not been so amended or repealed;
(f) affect any proceedings including that relating to an appeal, review or reference, instituted before on, or after the appointed day under the said amended Act or repealed Acts and such proceedings shall be continued under the said amended Act or repealed Acts as if this Act had not come into force and the said Acts had not been amended or repealed.
(3) The mention of the particular matters referred to in sub-sections (1) and (2) shall not be held to prejudice or affect the general application of section 6 of the General Clauses Act, 1897 (10 of 1897.) with regard to the effect of repeal.”
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