The Bombay High court quashed the notice issued by Superintendent, CGST, intimating that petitioner’s case has been selected for scrutiny or audit for the period January 2019 to March 2019 and to submit information or records for the period 2015-16 to 2017-18 to the officers of Central Excise Revenue Audit (CERA) for audit.
The Petitioner, Kiran Gems Pvt. Ltd. is engaged in manufacture and export of cut and polished diamonds and is registered as service provider under the provisions of Finance Act, 1994.
The office of Assistant Commissioner of Central Tax, through the email intimated the petitioner that the CERA audit was being conducted for the period from January 2019 to March 2019 and that the petitioner’s case was selected for scrutiny or audit by LAP-XII CERA (GSTA). The Petitioner was called upon to submit information or records for the period 2015-16 to 2017-18.
Mr. Bharat Raichandani, Advocate for the Petitioner asserted that the impugned notice / intimation seeking audit of petitioner’s accounts is without jurisdiction i.e it has been issued without invoking the provisions of statutory laws under which a special audit, as purported, can be conducted.
Mr. Raichandani further contended that there is no enabling statutory provision available to the respondents to seek information pertaining to pre and post GST era for CERA audit from a private entity; such action suffers from a jurisdictional error since power to audit being a statutory power traceable to the relevant statute being absent in the present case.
Mr. Jetly, Senior counsel appearing on behalf of the respondents submitted that the impugned communication issued under the provisions of Section 16 of the CAG’s (DPC) Act provides for audit by the CAG of all receipts payable into the Consolidated Fund of India and of each State and each Union Territory having a legislative assembly.
The division bench of Justice Milind N. Jhadav and Justice Ujjal Bhuyan the statutory responsibility of the CAG is to audit receipts of the Union and States. These receipts include both direct and indirect taxes. It is the duty of the Central Excise Revenue Audit (CERA) to see that sums due to the Government are properly assessed, realized and credited to the Government account. The scheme enacted and envisaged in Chapter III of the CAG’s (DPC) Act, 1971 begins with the word “Comptroller of Auditor General to compile accounts of Union and or States.”
The court noted that the provisions of Section 16 pertaining to audit of all receipts which are payable into the Consolidated Fund of India and each State and of each Union Territory is required to be construed with respect to the accounts maintained in the Government departments / Corporations belonging to the Government.
Therefore, the court held that In view of the mandate of Section 16 of the CAG’S (DPC) Act, 1971, CERA audit cannot be extended to call for audit of a private entity such as the petitioner company.
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