Karnataka High Court grants Interim Stay against CAG Audit of Service Tax Assessee
THE petitioner, a Service Tax assessee received an intimation from the AG's office proposing to audit their records and to keep ready 18 records for audit. The petitioner challenged this before the Karnataka High Court on the grounds inter alia that:
1. No power has been vested with the Comptroller and Auditor General of India, to conduct audit of companies which are fully privately owned, as is the case of the Petitioner, under Section 94 of the Finance Act, 1994 or under the Rules issued by the Central Government, under this Section.
2. If it is to be held that the Comptroller and Auditor General of India and its wings have rights to audit the ‘receipts' at the hands of the assessees who pay taxes which go into the Consolidated Fund of India, it could lead to an absurd situation wherein, the accounts of all private parties including individuals can be audited by the C & AG, on the basis of the view that the tax paid by these individuals and assessees are to be treated as going into the Consolidated Fund of India.
3. In terms of the Comptroller and Auditor General's (Duties, Powers and Conditions of Service) Act, 1971, the AG's officers have no power, authority or jurisdiction whatsoever to audit the records of the Petitioner. Even under the provisions of the Finance Act, 1994, they have no authority or jurisdiction to audit the records of a private company. Even under Rule 5A of the Service Tax Rules, 1994, there is no power conferred to conduct an ‘Audit'. Even otherwise, such a power is ultra vires the Finance Act, 1994, inasmuch as no such power is either contemplated or conferred in the said Act, to enable the Union to frames rules for conduct of an Audit by the AG.
The Karnataka High Court recently, granted an interim stay of the Audit and the matter is posted in July 2013.