2018 (7) TMI 667 - HC - Service Tax

Service Tax Audit - Vires of sub-rule (2) of Rule 5A of the Service Tax Rules, 1994 as substituted by notification no. 23/24/ST dated December 25, 2014 - case of petitioner is that the said sub-rule is in conflict with provisions of Section 72A of the Finance Act, 1994 - Held that - It would be appropriate to follow Mega Cabs Pvt. Ltd. 2016 (6) TMI 163 - DELHI HIGH COURT . - Such provisions were struck down. - Such provisions were also struck down - Appeals are pending against the judgment and order - Therefore, it would be iniquitous to allow the respondents to proceed on the basis of provisions struck down by a High Court, against the petitioner. Decided in favor of petitioner.

Summary

Issues:
1. Declaration sought regarding the validity of sub-rule (2) of Rule 5A of the Service Tax Rules, 1994.
2. Declaration sought regarding the provisions of clause (k) of sub-section (2) of Section 94 of the Finance Act, 1994.
3. Challenge against a notice dated February 16, 2015.

Analysis:
1. The petitioner challenged the validity of sub-rule (2) of Rule 5A of the Service Tax Rules, 1994, substituted by notification no. 23/24/ST dated December 25, 2014, as arbitrary and in conflict with Section 72A of the Finance Act, 1994. The court noted that similar provisions were previously struck down by the Delhi High Court in cases like Travelite (India) and Mega Cabs Pvt. Ltd. The court followed the precedent set by Mega Cabs Pvt. Ltd. as the respondents failed to provide any new facts or laws to warrant a different decision. Consequently, the impugned notice dated February 16, 2015, was quashed.

2. The petitioner also sought a declaration regarding the provisions of clause (k) of sub-section (2) of Section 94 of the Finance Act, 1994, arguing that it provided unguided and uncontrolled power of delegation. The court's decision primarily focused on the challenge against sub-rule (2) of Rule 5A, and no specific ruling was provided regarding this particular provision in the judgment.

3. The court highlighted that Rule 5A was initially introduced by a notification dated December 28, 2007, and was previously challenged and struck down by the Delhi High Court in Travelite (India) and Mega Cabs Pvt. Ltd. The court emphasized that until a decision is made in the pending appeals against these judgments, the provisions remain struck down. Therefore, the court quashed the notice issued on the basis of provisions that had been invalidated by the Delhi High Court.

In conclusion, the writ petition was disposed of without any order as to costs, and the court directed the parties to obtain urgent certified copies of the order upon compliance with formalities.