2019 (4) TMI 524 - HC - Service Tax

Audit under Service Tax - Production of documents for the purposes of Audit of accounts/records - constitutional validity of Rule 5A of the Service Tax Rules, 1994 - competence of the authority to issue the impugned notice - very long list of documents or not - Held that - The Court is of the view that the Petitioner has made out a prima facie case in its favor to grant of further stay of proceedings pursuant to the impugned letter/notice dated 20th February, 2019. It is accordingly directed that till the next date of hearing, further proceedings pursuant to the impugned letter dated 20th February, 2019 shall remain stayed. 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 Petitioner challenged the letter requiring the production of various documents for audit, citing Rule 5A of the Service Tax Rules, 1994 as unconstitutional. The Petitioner relied on a previous judgment declaring a related rule ultra vires, but the operation of that judgment was stayed by the Supreme Court. The High Court of Gujarat had also granted a stay in a similar case, noting the absence of a provision saving Rule 5A after the enactment of the Central Goods and Services Tax Act, 2017.

Competence of the Authority:
Another issue raised was the authority of the Assistant Commissioner (Audit) to issue the notice, as Rule 5A (2) required it to be issued by an officer empowered under sub-Rule (1) or an audit party deputed by the Commissioner or Controller and Auditor General. The Respondent's counsel sought more time to confirm the authorization of the Assistant Commissioner, which was not granted by the Court, indicating a lack of preparedness on the Respondent's part.

Number of Documents Requested:
The Petitioner also contested the extensive list of documents requested by the Respondents, questioning the necessity of all items listed. The Court expressed doubt regarding the need for such a large number of documents, especially considering that the Petitioner's accounts had been audited up to a certain year, which was not acknowledged in the impugned letter. The Court found merit in the Petitioner's arguments and granted a stay on further proceedings until the next hearing date.

In conclusion, the High Court granted a stay on the proceedings related to the notice issued to the Petitioner until the next hearing date. The Respondent was given time to file a counter affidavit, and the case was listed for further proceedings on 1st August 2019.