2011 (12) TMI 200 - HC - Service Tax

Applicability of CAG (Duties, Powers and Conditions of Service) Act, 1971 for conduct of audit of private company - prayer for interim order - petitioner submitted that under the 1971 Act, audit regarding the accounts of the State and Central authorities or the State companies can be conducted Held that - Since the issue relates to the applicability of the 1971 Act and as I find from the letter dated 8th December, 2011 that audit commencing on 12th December, 2011 has been withheld, let there be an interim order directing that no audit be conducted by the authorities till 16th March, 2012 or until further orders, whichever is earlier.

Summary

Issues: Applicability of the Comptroller and Auditor-General's Act, 1971 to audit a private company, Prayer for interim order, Scope of Section 16 of the Act

The judgment by the High Court of Calcutta, delivered by Justice Soumitra Pal, pertains to the applicability of the Comptroller and Auditor-General's Act, 1971 to audit a private company, the prayer for an interim order, and the scope of Section 16 of the Act. The matter was taken up for hearing as records were placed by the Department, with an affidavit of service filed in court and a notice dated 8th December, 2011 kept on record. The advocates for both parties, Mr. Mittal for the petitioner and Mr. Dasgupta for the respondent, presented their arguments.

Regarding the prayer for an interim order, it was contended by the petitioner's advocate that as per the Comptroller and Auditor-General's Act, 1971, audits can be conducted for State and Central authorities or State companies. However, the impugned letter indicated an audit of a private company, the petitioner. On the other hand, the respondent's advocate argued that Section 16 of the Act aims to ensure an effective check on revenue assessment, collection, and proper allocation, particularly concerning service tax assessment. The court noted that the audit, scheduled to begin on 12th December, 2011, was withheld based on the letter dated 8th December, 2011. Consequently, an interim order was issued prohibiting any audit by authorities until 16th March, 2012, or until further orders, whichever is earlier.

The judge emphasized the importance of understanding the applicability of the 1971 Act in this context. By directing that no audit be conducted until a specified date, the court sought to maintain the status quo and prevent any potential unauthorized audit activity. The order aimed to balance the interests of both parties while ensuring compliance with the legal framework governing audits under the Comptroller and Auditor-General's Act, 1971. Additionally, the court instructed the provision of an urgent certified copy of the order to the concerned parties for immediate reference and action.

In conclusion, the judgment addressed the specific issue of whether the provisions of the Comptroller and Auditor-General's Act, 1971 could be invoked for auditing a private company. By issuing an interim order, the court sought to preserve the rights of the petitioner and prevent any premature or unauthorized audit activity. The decision underscored the need for a thorough examination of the legal framework and statutory provisions governing audits, particularly concerning the assessment and allocation of revenue, to ensure compliance and fairness in the audit process.