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2019 (8) TMI 396 - HC - Service TaxPower to audit by the service tax department - Rule 5A(2) - power of officers post GST since provision of Chapter V of Finance Act, 1994 repealed - scope of saving clause - petitioner's contention is that the internal audit is nowhere defined under the Finance Act, 1994 and he is not having any authority to conduct the audit and to demand the documents - Section 173 and 174 of the Central Goods and Services Act, 2017 as well as Section 72-A of the Finance Act, 1994 - principles of natural justice - HELD THAT - As the provisions of Section 174(2) also is clearly applicable in respect of an omission of the enactment under Section 173, therefore, any such investigation, enquiry, etc., that was instituted, continued or enforced under Chapter V of the Finance Act of 1994, continues to remain in place inspite of such omission of Chapter V of the Finance Act. In other words, Section 174(2)(e) is a savings clause in respect of any investigation, enquiry etc., that was/to be instituted under Chapter V of the Finance Act of 1994. A conjoint reading of Section 173 and 174(2)(e) would show that while bringing an omission to the provision of Chapter V of the Finance Act of 1994, a savings clause for continuing with the proceedings initiated/to be initiated was also duly provided. If a statute stood omitted with a savings clause, the savings clause would not render it impermissible for the proceedings initiated/to be initiated under Chapter V of the Finance Act of 1994, which stood omitted by Section 173 of the CGST Act of 2017 to be continued. This Court is of the considered opinion that no case for interference is made out in the matter specially when, the show-cause notice has been issued - petition dismissed.
Issues Involved:
1. Validity of the show-cause notice issued under the Finance Act, 1994 after the introduction of the GST Act, 2017. 2. Jurisdiction and authority of the respondent to demand documents for audit under the repealed Finance Act, 1994. 3. Applicability of Section 173 and 174 of the Central Goods and Services Tax Act, 2017. 4. Legality of the audit proceedings initiated under the Finance Act, 1994 post-GST regime. 5. Prematurity of the writ petition challenging the show-cause notice. Detailed Analysis: 1. Validity of the Show-Cause Notice: The petitioner, M/s Matrika Infrastructure Private Limited, contested the show-cause notice dated 01.01.2018 issued by the Assistant Commissioner (Audit) Central Tax, CGST, Central Excise & Service Tax, Indore. The petitioner argued that the notice demanding documents for audit was invalid as the Finance Act, 1994 had been repealed by the introduction of the GST Act, 2017. The petitioner relied on Sections 173 and 174 of the GST Act, asserting that these provisions nullified the authority to issue such notices under the old law. 2. Jurisdiction and Authority to Demand Documents: The petitioner contended that the internal audit demanded by respondent No.5 was not defined under the Finance Act, 1994, and thus, the respondent lacked the authority to conduct the audit and demand documents. The petitioner further argued that the audit function is specialized and should be governed by specific provisions under Section 72A of the Finance Act, 1994, which were not applicable in this case. 3. Applicability of Section 173 and 174 of the GST Act, 2017: The petitioner argued that Section 173 of the GST Act omitted the provisions of the Finance Act, 1994, and Section 174 did not save Rule 5A(2) of the Service Tax Rules, 1994, thus rendering any fresh audit proceedings under the repealed Act invalid. The respondents countered this by stating that the audit was conducted in accordance with statutory provisions and Circular No.181/7/2014/ST, and the show-cause notice was issued to protect revenue interests. 4. Legality of Audit Proceedings Post-GST Regime: The petitioner claimed that the audit conducted for the period prior to the GST regime was illegal under the new GST laws. However, the court noted that Section 174(2) of the GST Act provides a saving clause, allowing for the continuation of investigations, inquiries, verifications, and other legal proceedings initiated under the repealed Act. The court referenced judgments from the Calcutta High Court and Gauhati High Court, which upheld the validity of such proceedings under the saving provisions of the GST Act. 5. Prematurity of the Writ Petition: The court emphasized that the writ petition challenging the show-cause notice was premature. It cited several Supreme Court judgments, including Special Director Vs. Mohd. Ghulam and Union of India Vs. Kunisetty Satyanarayana, which held that writ petitions should not be entertained against mere show-cause notices unless there is a clear lack of jurisdiction. The court advised the petitioner to respond to the show-cause notice and raise all relevant grounds before the authority issuing the notice. Conclusion: The court concluded that the petitioner should file a reply to the show-cause notice and participate in the proceedings before the authority. The court dismissed the writ petition as premature, allowing the assessing officer to proceed in accordance with the law without being influenced by the court's observations. The court did not find any merit in interfering with the show-cause notice at this stage, emphasizing the availability of a statutory mechanism for addressing the petitioner's grievances.
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