2019 (4) TMI 523 - HC - GST

Initiation of certain proceedings under Chapter V of the Finance Act, 1994 - transition to GST Regime - Section 174 of CGST Act 2017 - whether any fresh proceeding under the 1994 Act for scrutiny, inspection or audit, if commenced after omission of the said Act is prima-facie legally valid or not? - Held that - The expression instituted in sub-clause(e) would imply the proceeding which stood already instituted at the time of repeal or omission of the 1994 Act. In such circumstances, we choose to follow the course taken by the Hon ble High Courts of Gujarat and Delhi and direct status quo to be maintained till the next date of hearing so far as the proceeding which form the subject matter of the present writ petition is concerned. Matter shall be listed for hearing on 7th May, 2019 at 2 15 p.m.

Summary

Issues:
1. Validity of proceedings under Chapter V of the Finance Act, 1994 post its omission.
2. Interpretation of the saving clause under Section 174(2) of the Central Goods and Services Tax Act, 2017.
3. Legality of notices, summons, and actions taken by revenue authorities post-omission of the 1994 Act.
4. Application of the phrase "may be instituted, continued or enforced" in the saving clause.

Analysis:

1. The petitioner, a registered society, challenged the initiation of proceedings under Chapter V of the Finance Act, 1994, which was omitted upon the introduction of the Central Goods and Services Tax Act, 2017. The petitioner contended that the saving clause did not protect the Service Tax Rules, questioning the legality of actions taken under those Rules. Reference was made to relevant judgments, including the Kolhapur Canesugar Works Ltd. case, to support this argument.

2. The Union of India argued in favor of sustaining the proceedings based on Section 174(2) of the 2017 Act, specifically sub-clause (e), which was interpreted to include actions initiated subsequent to the omission of the 1994 Act. A judgment from the Guwahati High Court was cited to support this interpretation, emphasizing the continuation of investigations and proceedings post-omission.

3. The legality of notices, summons, and actions taken by revenue authorities post-omission was questioned by the petitioner. The absence of specific provisions cited in the instruments challenged in the writ petition raised concerns about the authority under which such actions were conducted. The interim stage required examination of the validity of fresh proceedings under the 1994 Act post-omission.

4. The interpretation of the phrase "may be instituted, continued or enforced" in the saving clause was crucial. The High Court considered judgments from Gujarat and Delhi, staying orders in similar situations. The Court opined that the term "instituted" implied proceedings already initiated at the time of repeal or omission of the 1994 Act. Consequently, the Court directed the maintenance of status quo until the next hearing date, following the approach taken by other High Courts.

This detailed analysis of the judgment from the Jharkhand High Court highlights the complex legal issues surrounding the omission of the Finance Act, 1994, and the implications on ongoing proceedings under the new GST regime.