2019 (8) TMI 1082 - HC - GST

Service Tax audit of a private agency - Rule 5A of the Service Tax Rules, 1994 - The issue covered by the decision in the case of M/S OWS WAREHOUSE SERVICES LLP THROUGH ASADULLAH SIDDIQUE S/O VASIULLAH SIDDIQUE VERSUS UNION OF INDIA 2018 (10) TMI 1008 - GUJARAT HIGH COURT where it was held that There was no saving of Rule 5A in such manner that fresh proceedings for audit could be initiated in exercise of powers under the said Rule. We, therefore, have serious doubts whether, with the aid of Rule 5A of the Service Tax Rules, 1994, the CAG can carry out compulsory Service Tax audit of private agencies like the petitioner. Let NOTICE be issued to the respondents returnable on 17/10/2019 .

Summary

Issues involved:
Challenge to Rule 5A of Service Tax Rules, 1994 in light of the introduction of Goods and Service Tax Act and its impact on audit proceedings.

Detailed Analysis:

1. Challenge to Rule 5A of Service Tax Rules, 1994:
The writ application challenges Rule 5A of the Service Tax Rules, 1994, which was also under challenge in a previous case before the court. The interim order from the previous case highlighted the legal controversies surrounding the rule. The petitioner contended that the introduction of the Goods and Service Tax Act, along with the Finance Act, 1994, and the Service Tax provisions, stand repealed. Reference was made to Section 174 of the Central Goods and Service Tax Act, 2017, regarding the Saving Clause and its impact on Rule 5A.

2. Interpretation of Saving Clause under CGST Act:
Section 173 of the CGST Act states that Chapter V of the Finance Act, 1994, shall be omitted, and Section 174 contains Repeal and Saving Clauses. The Saving Clause under Subsection (2) of Section 174 was analyzed, emphasizing that it does not save Rule 5A in a manner that would allow fresh audit proceedings to be initiated under the said Rule. The court expressed doubts on whether the Comptroller and Auditor General (CAG) could conduct compulsory Service Tax audit of private agencies like the petitioner under Rule 5A.

3. Court's Decision and Ad-interim Relief:
In light of the interpretation of the Saving Clause and the doubts raised regarding the applicability of Rule 5A, the court issued a Notice returnable on a specific date. As an ad-interim relief, the court stayed the impugned order, preventing the CAG from conducting further Service Tax audit of the petitioner until further proceedings. The court granted direct service in this regard.

4. Conclusion:
The judgment delves into the legal complexities surrounding the challenge to Rule 5A of the Service Tax Rules, 1994, in the context of the introduction of the Goods and Service Tax Act. The interpretation of the Saving Clause under the CGST Act played a crucial role in the court's decision to stay the audit proceedings, raising doubts on the validity of such audits under the said Rule. The detailed analysis provided insight into the legal framework and its implications on audit procedures, ensuring a comprehensive understanding of the judgment.