2019 (3) TMI 1728 - HC - Service Tax

Direction for production of documents for the purposes of Audit of its accounts/records - Rule 5A of the Service Tax Rules, 1994 - competence of the authority to issue the impugned notice - number of documents sought by the Respondents. Requirement to produce the documents - Rule 5A of the Service Tax Rules, 1994 - HELD THAT - The Gujarat High Court in M/s OWS Warehouse Services LLP vs. Union of India 2018 (10) TMI 1008 - GUJARAT HIGH COURT noticed that while enacting the Central Goods and Services Tax Act, 2017 there was no provision saving Rule 5A of the ST Rules to enable fresh proceedings for audit to be initiated under that rule for a period prior to the repeal of the Rule. Competence of the authority to issue the impugned notice - HELD THAT - The notice has been issued by the Assistant Commissioner (Audit) whereas Rule 5A (2) mandates that it should be issued by an officer empowered under sub-Rule (1) or an audit party deputed the Commissioner or Controller and Auditor General . When enquired whether the Assistant Commissioner (Audit) was duly authorised by the Commissioner, Mr. Amit Bansal, learned counsel for Respondent No.2 sought time for instructions. Number of documents sought by the Respondents - HELD THAT - Indeed, it appears prima facie to be a very long list of documents and it is doubtful whether all of these documents are in fact necessary for the purposes for which the notice has been issued. This is apart from the fact that there has already been an audit of the Petitioner s account/records up to the year 2014-15. This fact is not even noticed in the impugned letter dated 18th February 2019 issued by Respondent No.2. The Court is of the view that the Petitioner has made out a prima facie case in its favour to avail grant of further stay of proceedings pursuant to the impugned letter/notice dated 18th February, 2019 - List on 1st August, 2019.

Summary

Issues:
1. Constitutionality of Rule 5A of the Service Tax Rules, 1994
2. Competence of the authority issuing the notice
3. Number of documents requested by the Respondents

Constitutionality of Rule 5A:
The petition challenges a letter requiring the production of various documents for audit purposes. The Petitioner argues that Rule 5A of the ST Rules, under which the letter was issued, is unconstitutional. The Court notes a previous judgment declaring a part of Rule 5A ultra vires, but the operation of this judgment has been stayed by the Supreme Court. The Petitioner relies on a Gujarat High Court decision that stayed a similar notice, highlighting the absence of a saving provision for Rule 5A under the Central Goods and Services Tax Act, 2017.

Competence of the Authority:
Another issue raised is the competence of the authority issuing the notice. While Rule 5A mandates that the notice should be issued by an authorized officer, the notice in question was issued by the Assistant Commissioner (Audit). The Respondent seeks time to confirm if the Assistant Commissioner was duly authorized, raising concerns about procedural compliance.

Number of Documents Requested:
The Petitioner questions the extensive list of documents requested, expressing doubt about the necessity of all items listed. The Court observes that the list is lengthy and questions whether all documents are essential, especially considering a prior audit conducted up to 2014-15, which was not acknowledged in the impugned letter. The Court finds merit in the Petitioner's arguments, granting a stay on further proceedings until the next hearing date.

In summary, the judgment addresses the challenges to the constitutionality of Rule 5A, the authority of the officer issuing the notice, and the excessive number of documents requested. The Court acknowledges the Petitioner's concerns regarding procedural irregularities and the need for a thorough review of the documents requested for audit purposes.