2018 (10) TMI 326 - HC - Service Tax

Power to Audit under Service Tax - Declaration sought that sub-rule (2) of Rule 5A of the Service Tax Rules, 1994 as substituted by notification No. 23/2014-S.T., dated December 25, 2014 is arbitrary and in conflict with provisions of Section 72A of the Finance Act, 1994. Held that - Since sub-rule 2 of Rule 5A of the Service Tax Rules, 1994, as substituted by notification dated December 25, 2014 was declared ultra vires by Mega Cabs Pvt. Ltd. (supra), it would be appropriate to grant interim stay of the proceedings. Such stay will continue till November 30, 2018 or until further orders whichever is earlier. List the writ petition under the heading for Hearing in the monthly list of November 2018.

Summary

Issues Involved:
1. Declaration sought regarding sub-rule (2) of Rule 5A of the Service Tax Rules, 1994 and its conflict with Section 72A of the Finance Act, 1994.
2. Declaration sought regarding the unguided nature of 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.

Issue 1: Declaration on Sub-rule (2) of Rule 5A of the Service Tax Rules, 1994:
The petitioner sought a declaration that sub-rule (2) of Rule 5A of the Service Tax Rules, 1994, as substituted by notification No. 23/2014-S.T., dated December 25, 2014, is arbitrary and in conflict with provisions of Section 72A of the Finance Act, 1994. The learned Advocate for the petitioner referred to a similar issue considered by the Delhi High Court in a previous case and highlighted that the provisions in question were held to be ultra vires. An appeal against this judgment was pending before the Supreme Court of India. Subsequently, the impugned provisions were introduced, but they were also struck down by the Delhi High Court in another case. The petitioner argued that since the provisions have been declared ultra vires, any notice issued based on them should be quashed. The Court acknowledged the previous judgment and granted an interim stay on the proceedings until November 30, 2018, or until further orders.

Issue 2: Declaration on Clause (k) of Sub-section (2) of Section 94 of the Finance Act, 1994:
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 is unguided and gives uncontrolled power of delegation. However, the judgment did not provide detailed analysis or resolution on this specific issue, focusing primarily on the declaration related to sub-rule (2) of Rule 5A of the Service Tax Rules, 1994.

Issue 3: Challenge Against Notice Dated February 16, 2015:
Apart from the declarations sought regarding the statutory provisions, the petitioner challenged a notice dated February 16, 2015. The judgment did not delve into the specifics of this notice or the grounds on which it was challenged. The Court directed the respondent to file affidavits and set deadlines for filing responses, indicating a procedural progression for addressing this challenge along with the main declarations sought.

In conclusion, the judgment addressed the challenges raised by the petitioner regarding the validity of certain provisions of the Service Tax Rules and the Finance Act, 1994. It provided interim relief by staying the proceedings due to the previous declarations of ultra vires nature of similar provisions by the Delhi High Court. The Court also outlined procedural steps for further submissions and scheduled the case for a hearing in the following month.