Supreme Court Stay on Service Tax Audit

SC stays Travelite India (Delhi HC) judgment striking down service tax rule 5A(2)

January 12, 2015[2015] 53 taxmann.com 238 (SC)

 

Service Tax : Supreme Court stayed operation of judgment of Delhi High Court in Travelite (India) holding that : (a) only type of audit contemplated under law is under section 72A, i.e., a special audit; (b) Parliament did not intend to provide for a general audit that "every assessee" may be subjected to "on demand" under rule 5A(2); and (c) rule 5A(2) of Service Tax rules, 1994 is ultra vires section 94

■■■

[2015] 53 taxmann.com 238 (SC)

SUPREME COURT OF INDIA

Union of India

v.

Travelite (India)*

H.L. DATTU, CJI.
A.K. SIKRI AND R.K. AGRAWAL, JJ.

Special Leave to Appeal (Civil) No. 34872 of 2014

DECEMBER  18, 2014 

Rule 5A of the Service Tax Rules, 1994, read with sections 72A, 83 and 94 of the Finance Act, 1994 and section 37B of the Central Excise Act, 1944 - Audit - Service Tax - Submission of Records - Assessee received a letter from Commissioner seeking records for scrutiny by an audit party - Assessee challenged said letter and also challenged rule 5A(2) as well as Instruction F. No. 137/26/2007-CX.4, dated 1-1-2008 issued there under as ultra vires Act on ground that there is no substantive power under Act to call for records and audit is provided only by section 72A and, therefore, mandate of section 72A cannot be exceeded - High Court held that : (a) Section 72A envisages an audit of an assessee's records only in special circumstances; (b) Revenue could not show any other substantive provision which justifies a probe into records of assessee, under conditions akin to those contemplated by rule 5A(2); (c) Parliament did not intend to provide for a general audit that "every assessee" may be subjected to, "on demand"; (d) thus, any attempt to include provision for such a general audit through back-door, such as through rule 5A(2) is ultra-vires; likewise, CBEC instruction was also void - On Department's Special Leave Petition to Supreme Court - HELD : There shall be stay of operation of judgment of High Court [Para 1] [Stay granted]

CASE REVIEW

 

Travelite (India) v. Union of India [2014] 48 taxmann.com 227/[2014] 46 GST 708 (Delhi) stayed.

Mukul Rohatgi, Attorney General Nisha Bagchi, Charul Sarin and B. Krishna Prasad, Advs. for the Appellant.

ORDER

 

1. There shall be stay of the operation of the impugned judgment and order dated 4-8-2014 passed by the High Court in Writ Petition (C) No.3774 of 2013.

■■

*In favour of revenue.