Bombay HC allows dept to conduct Service Tax Audit post implementation of GST [Read Order]

The Bombay High Court has allowed the Service Tax Department to conduct Service Tax Audit on post Implementation of Goods and Services Tax ( GST ).

The petition sought a declaration that Respondents do not have power under Rule 5A of the Service Tax Rules, 1994 read with Section 174(2)(e) of the Central Goods and Services Tax Act, 2017 to conduct audit for the period October 2013 to June 2017 i.e. prior to the introduction of CGST Act on 1st July, 2017.

The Petitioners contended that, various courts i.e. Gujarat High Court in the case of OWS Warehouse Services LLP V/s. Union of India, 2018 (19) G.S.T. 27 (Guj.), the Delhi High Court in the case of M/s.T.R. Sawhney Motors Pvt. Ltd. V/s. Union of India in Writ Petition(C) No.2138 of 2019 and Jharkhand High Court in the case of M/s.Sulabh International Social Service Organization, (Jharkhand State Branch) V/s. Union of India in Writ Petition(T)No. 1599 of 2019 have in respect of identical challenge granted interim relief to the petitioner.

The Petitioner also submitted that in any event, the Delhi High Court in Mega Cabs Pvt. Ltd. V/s. Union of India 2016 (43) S.T.R. 67 (Del.) has held that Rule 5A of Service Tax Rules, 1994 is an ultra virus to parent Act i.e. Finance Act, 1994.

The division bench comprising of Justice M.S Sanklecha and Justice M.S Sonak observed that, the decisions of Gujarat High Court in OWS Warehouse Services LLP Delhi High Court in M/s. T.R. Sawhney Motors Pvt. Ltd. and Jharkhand High Court M/s. Sulabh International relied upon by the petitioners were all at the ad­interim stage subject to further consideration by the Courts itself on the next date.

Mr.Raichandani informs us that no further order in the above matters has been passed by the above courts. Thus, not much support can be drawn by the petitioner on the basis of the above decisions as they are still awaiting consideration.

While allowing the Audit, the Court also observed that the issue of the saving of Rule 5A(2) of Service Tax Rules, 1992 on the introduction of CGST Act, 2017 is an issue that requires detailed consideration. This would be appropriately done at the final hearing. Thus, granting of interim relief at this stage would tantamount to granting final relief at the stage of admission.

“Grant of interim relief at this stage would prevent the respondents from carrying out the audit as permitted under Rule 5A of Service Tax Rules, 1994 and Section 174(2)(e) of the CGST Act”, the Court also said.