Service Tax Audit prima facie permissible post GST regime – Calcutta High Court. Authorities entitled to audit for the period when Finance Act 1994 was applicable
ABCAUS Case Law Citation:
ABCAUS 2730 (2019) (01) HC
Important Case Laws Cited/relied upon:
Infinity BNKE Infocity Pvt. Ltd. Versus Union of India
OWS Warehouse Services LLP Versus Union of India
Union of India & Ors. Versus Infinity Infotech Parks Ltd. and Anr
Union of India & Ors. Versus Magnacon
The Gujarat High Court in a recent judgment had stayed Service Tax Audit by CAG holding that under GST Regime service tax audit under Rule 5A can not be initiated.
However, the Calcutta High Court has held that an enquiry or an investigation or even a legal proceeding under the Finance Act 1994 is permissible notwithstanding the CGST Act 2017 coming into effect.
In the instant case, the assessee had challenged notice and the subsequent reminders thereto issued by the GST Office proposing to conduct an audit under the provisions of the Chapter V of the Finance Act, 1994 on the ground that such notice/reminder were issued without jurisdiction.
The case of the assessee was that in terms of the sections 173 and 174 of the CGST Act 2017, the provisions of Chapter V of the Finance Act, 1994 stands omitted and an audit contemplated under Chapter V of the Finance Act, 1994 is not saved by the provisions of Section 174 of the CGST Act 2017.
The assessee relied upon the judgment of the Calcutta High Court and Gujarat High Court granting stay in respect of proceedings under Rule 5A of the Service Tax Rules, 1994. However it was submitted that the provisions of Rule 5A of the Service Tax Rules, 1994 were not challenge in the present writ petition, instead, the writ petition was founded upon the lack of jurisdiction of the authorities in proposing to undertake an audit under the Service Tax Act, 1994.
The Hon’ble High Court clarified that the provisions of Chapter V of the Finance Act, 1994 stands omitted by Section 173 of the Act of 2017 save as otherwise provided under the CGST Act 2017. Therefore, if any provision of the CGST Act 2017 allows the applicability of the Chapter V of the Finance Act, 1994, then notwithstanding the omission of the Chapter V of the Finance Act, 1994 under Section 173 the same continues to apply.
The Hon’ble High Court stated that Section 174 is the repeal and saving provisions. Sub-Section 1 of Section 174 repeals the provisions of the various statutes as mentioned therein. Sub-Section (2) of Section 174 stipulates that, notwithstanding the repeal of the Acts mentioned in Sub-Section (1) of Section 174 and the amendment of the Finance Act, 1994 to the extent mentioned in Sub-Section (1) of Section 174 or Section 173, it shall not affect any pending investigation, enquiry, verification or other legal proceedings and that, such proceedings may be instituted, continued or enforced as if such Act had not been repealed.
The Hon’ble High Court opined that prima facie, from the reading of Sections 173 and 174 of the CGST Act 2017, it appears that, an enquiry or an investigation or even a legal proceeding under the Finance Act 1994 is permissible notwithstanding the coming into effect of the CGST Act 2017.
The Hon’ble High Court opined that when the authorities were proposing to undertake an audit for the period when the Act of 1994 was applicable, they were entitled to do so.
Accordingly, the Hon’ble High Court declined to grant any interim order as prayed for.