ST - Calcutta High Court Restraints Department From Casual Visits to Assessees' Premises
IF you are registered under the Act, the Department has a feeling that they can just walk into your premises at their sweet will and disturb your equilibrium. They walk into your office as if they own it.In one such case, it seems the DGCEI officers walked in uninvited to the premises of an assessee and took away voluminous records including the Registration Certificate without even a panchnama. Almost always these are unwelcome guests.
In this ancient country, a guest is called 'atithi', meaning one without a date; the consequence is that a guest is a person who calls on you without information, without notice and without regard to time and date. And we are expected to treat him like God - Atithi Devo Bhava. The guests from the Revenue department are no different.
As per Section 82 of the Finance Act, 1994;
(1) Where the Joint Commissioner of Central Excise or Additional Commissioner of Central Excise or such other Central Excise officer as may be notified by the Board has reasons to believe that any documents or books or things, which in his opinion shall be useful for or relevant to any proceedings under this Chapter, are secreted in any place, he may authorise in writing any Central Excise officer to search for and seize or may himself search and seize such documents or books or things.
(2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974), relating to searches, shall, so far as may be, apply to searches under this section as they apply to searches under that Code.
As per Rule 5A of the service tax Rules,
(1) An officer authorised by the Principal Commissioner or Commissioner in this behalf shall have access to any premises registered under these rules for the purpose of carrying out any scrutiny, verification and checks as may be necessary to safeguard the interest of revenue.
(2) Every assessee, shall, on demand make available to the officer empowered under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, or a cost accountant or chartered accountant nominated under section 72A of the Finance Act, 1994,-
(i) the records maintained or prepared by him in terms of sub-rule (2) of rule 5;
(ii) the cost audit reports, if any, under section 148 of the Companies Act, 2013 (18 of 2013); and
(iii) the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 (43 of 1961),
for the scrutiny of the officer or the audit party, or the cost accountant or chartered accountant, within the time limit specified by the said officer or the audit party or the cost accountant or chartered accountant, as the case may be.
Netizens will remember that the Delhi High Court recently struck down Rule 5A(2) to the extent that it authorises the officers of the Service Tax Department, the audit party deputed by a Commissioner or the CAG to seek production of the documents mentioned therein on demand as ultra vires the FA and, therefore, struck it down to that extent. Please see 06 06 2016.
Now Rule 5A(1) is under challenge before the Calcutta High Court. ()
The High Court on 14th July 2016 directed the Revenue to file affidavit-in-opposition within four weeks and the case is posted for hearing on 1st September 2016.
The High Court observed,
Upon hearing the parties, prima facie the Bench perceives the challenge to Rule 5A(1) to be well founded, as it seeks to override the section. It appears that Rule 5A(2) has been declared ultra vires by an Hon'ble Division Bench of the Delhi High Court. This Bench prima facie finds no reason to disagree with such decision. If the authorities cannot make any demand as envisaged in sub-rule (2), gaining access to any premises under sub-rule (1) may not serve any purpose.
In that view of the matter, the respondents are restrained from taking recourse to Rule 5A(1) against the petitioner, and the petitioner shall also not be under any liability to place books/accounts, etc. if any demand is made. The respondents shall, however, be free to take recourse to Section 82 of the Finance Act in accordance with law.
Maybe, now the officers just cannot walk into the premises of the assessees at their sweet will.