- Words “cost accountant or chartered accountant nominated under section 72A of the Finance Act, 1994” were not specifically mentioned in this rule.
- Time limit with the assessee for providing the requisite documents was 15 days from the date of demand of the documents.
- Words “the cost audit reports, under section 148 of the Companies Act, 2013,” were not specifically mentioned in this rule.
Advocate Anandaday Misshra
It is pertinent to note that very recently , the Honourable High Court of Delhi in the case of Travelite (India) vs. UOI & Ors, while quashing Rule 5A(2) of the Service Tax Rules and the CBEC Instructions prescribing the manner of an audit and the records that can be called for by the authorities, held that
“Section 74A prescribes the conditions meriting such special audit compels the necessary inference that the Parliament did not intend to provide for a general audit that “every assessee” may be subjected to, “on demand”. This Court is thus of the opinion that any attempt to include provision for such a general audit through the back-door, such as through the impugned rule, is ultra-vires the rule making power conferred under Section 94(1). Rule 5A(2) must consequently be struck down.”
Before , it was struck down it read as below
Rule 5A (2) Every assessee shall, on demand, make available to the officer authorised under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, within a reasonable time not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by such officer or the audit party, as the case may be,-
(i) the records as mentioned in sub-rule (2) of rule 5;
(ii) trial balance or its equivalent; and
(iii) the income-tax audit report, if any, under section 44 AB of the Income-tax Act, 1961 ( 43 of 1961), for the scrutiny of the officer or audit party, as the case may be.’’.
It compelled the Government to come out with an amendment in Rule 5A(2) of Service Tax Rules , 1994. The Rule 5 A (2) is re-introduced under Notification No. 23/2014-ST dated 05.12.2014.
(Advocate Anand Mishra, AMLEGALS– The author is a leading indirect tax advocate handling cases in CESTAT & High Courts of India. He can be contacted on anand@amlegals.com and for more please refer www.amlegals.com)
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As rightly said by Shri Subrahmanyam Sir, when the Section itself has not been amended, merely amending the Rule which was struck down by the Hon’ble HC will again be termed as ultra vires.
However where the audit has been undertaken and certain audit points / objections have been raised. what will be the status of such audit points / objections? even if they are correct? Can the dept. issue SCN based on such audit objections?
what about the audit objection raised and scn issued what is their validity what about the past scn confirmed , appeal filed ?
When the basic law was struck down by the Hon’ble High Court, until and unless the basic law is framed again by parliament, or the High Court’s decision was stayed/set aside, what is the use of amendment and that too by an executive Notification?