30 September 2016

SC on Service Tax Audit


Apex Court stays Delhi HC's judgment of 'Mega Cabs' on service tax audit
September 30, 2016[2016] 73 taxmann.com 402 (SC)

Service Tax : Judgment of Delhi High Court quashing rule 5A(2) of Service Tax Rules, 1994 and holding service tax audits as invalid, has been stayed by Supreme Court; hence, for time being, service tax audits may continue

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[2016] 73 taxmann.com 402 (SC)

SUPREME COURT OF INDIA

Union of India

v.

Mega Cabs (P.) Ltd.

Madan B. Lokur AND DR. D. Y. CHANDRACHUD, JJ.

Petition(s) for Special Leave to
Appeal (C) no(S). 26675 of 2016

SEPTEMBER  26, 2016 

Rule 5A , read with rule 5 of the Service Tax Rules, 1994 and sections 72, 72A, 73, 82 and 94(2)(k) of the Finance Act, 1994 - Audit - Service Tax - Submission of Records - Rule 5A(2) was amended w.e.f. 5-12-2014 authorising officers of Service Tax Department or audit party to seek production of documents on demand and Circulars 181/7/2014-ST and Circular 995/2/2015-CX were issued power of audit and audit norms - Assessee challenged said rule and Circulars on ground that there is no power of audit with service tax authorities and only audit under Section 72A can be conducted by Chartered/Cost Accountants - High Court held that : (A) there is no general power with service tax authorities to conduct audit; (B) word 'verify' in section 94(2)(k) empowers verification of records and does not empower 'audit' of records, as audit is an specialized function and cannot be entrusted to any and every officer of department; (C) moreover, 'records' would mean 'records' required to be kept under rule 5(2), therefore, rule 5A(2) requiring even furnishing of 'audit reports' exceeds mandate of 'records'; and (D) hence, Rule 5A(2) and two Circulars were ultra vires and quashed - On Revenue's Special Leave Petition before Supreme Court - HELD : Notice be issued in petition - In meanwhile, there shall be a stay of operation of judgment of High Court. [Para 3] [Partly in favour of Revenue]

Circulars and Notifications : Notification No. 23/2014-ST, dated 5-12-2014, Circular No. 181/7/2014-ST dated 10-12-2014, Circular No. 995/2/2015-CX dated 27th February 2015

CASE REVIEW

 

Mega Cabs (P.) Ltd. v. Union of India [2016] 70 taxmann.com 51 (Delhi) - stayed.

Mukul Rohatgi, AG, Rupesh Kumar, Subash C. Acharya, Ms. Diksha Rai, Nikhil Rohatgi, Mohit Khubchandani, Advs. and B. Krishna Prasad, AOR for the Petitioner. J.K. Mittal, Rajveer Singh, Advs. and Praveen Swarup, AOR for the Respondent.

ORDER

 

Issue notice.

Mr. J.K. Mittal, learned counsel accepts notice on behalf of the sole respondent.

In the meanwhile, there shall be a stay of the operation of the impugned judgment and order dated 3.6.2016 passed by the High Court in Writ Petition(C) No.5192 of 2015.

Tag with Special Leave Petition (Civil) No.34872 of 2014



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