Service Tax - Audit by CAG - Supreme Court Stays Delhi High Court Judgement in Travelite
NETIZENS will remember that the Delhi High Court in the case of M/s Travelite (India) - , held that any attempt to include provision for such a general audit through the back-door, such as through the impugned rule, is ultra-vires the rule making power conferred under Section 94(1). Rule 5A(2) was consequently struck down.
Board had just clarified in Circular No. 181/2014, dated 10.12.2014 that "the Hon'ble High Court of Delhi in the judgment dated 04.08.2014 in the case of M/s Travelite (India) - had quashed rule 5A(2) of the Service Tax Rules, 1994 on the ground that the powers to conduct audit envisaged in the rule did not have appropriate statutory backing. This judgment can now be distinguished as a clear statutory backing for the rule now exists in section 94(2)(k) of the said Act."
Several Netizens have written to say that since the Board has agreed that prior to 6.8.2014, there was no power to audit as the Rule 5A(2) itself was void, all the audits done prior to 6.8.2014 were illegal. But nothing can be done against such illegal audits already completed as Show Cause Notices will still be valid and whatever illegal gratification is paid was and is always illegal and there is no refund mechanism for such payments.
Anyway Government has won the first round. Yesterday they got a stay from the Supreme Court. The issue is taken seriously by the Government and the case was argued by the Attorney General. Supreme Court has stayed the operation of the impugned judgment and order of the High Court.