ST - Audit by CAG - High Court Stays
THE Gujarat High Court has stayed audit by the CAG. The High Court has taken into consideration the orders of the High Courts of Calcutta, Delhi and Allahabad.
Case of the petitioner is that the said authority has no power to conduct the audit of the accounts of the petitioner. Petitioner points out that Rule 5A of the Service Tax Rules, 1994 has been held unconstitutional by the Delhi High Court in its decision dated 04.08.2014 rendered in case of Travelite (India) Ltd. v. Union of India = 2014-TIOL-1304-HC-DEL-ST. The case of the petitioner is that in any case such Rule 5A would not authorize an audit party from C.A.G. to conduct any such special audit. Reliance in this way is placed on the decision of the learned Single Judge of the Calcutta High Court in case of SKP Securities Ltd. dated 26th September 2012 = 2013-TIOL-38-HC-KOL-ST. It was contended that quite apart from Rule 5A being ultra vires, Rule 5A (1) when refers to an officer authorized by the Commissioner for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue, such officer must be within the organization of the Commissioner and cannot be any outside agency.
The High Court observed, Prima facie, if Rule 5A is not valid, a serious question of the powers of the authority to issue the impugned communication would arise. Subsidiary question would be, even if Rule 5A is valid, would the communication in question be covered within the powers of the Commissioner as envisaged under subrule (1) of Rule 5A, which empowers the Commissioner to authorize any person to carry out the inquiry with respect to the accounts of an assessee. Whether such authorized persons can be an outsider of the organization of the Commissioner would also be an issue.
By way of interim relief, the High Court has prevented the CAG's Audit team from auditing the petitioner.