Following the decisions of the High Courts of Calcutta and Gauhati, a two-judge bench of the Jharkhand High Court has refused to stay the proposal to initiate the service tax audit after the rollout of Goods and Services Tax ( GST ) regime.
In the present writ petition, the petitioner, a society registered under the Societies Registration Act challenged the initiation of audit under Chapter V of the Finance Act, 1994.
They claimed that the aforesaid statute has been omitted with effect from 1st July 2017 upon introduction of Central Goods and Services Tax Act, 2017.
J.K. Mittal, the counsel appearing for the petitioner submitted that the officers appointed under the 2017 Act have already visited the premises of the writ petitioner on 23rd March 2019 and have collected several documents. The counsel challenged the legality of such notices and summons.
The department, on the other hand, the department relied on the judgment of the Guwahati High Court delivered in the case registered as W.P. (C) 2059/2018 (Laxmi Narayan Sahu Vs. Union of India and 2 Ors.) decided on 12th October 2018.
Justice Aniruddha Bose and Justice Ratnaker Bhengra held that “At the interim stage, we have to examine if any fresh proceeding under the 1994 Act for scrutiny, inspection or audit, if commenced after omission of the said Act is primafacie legally valid or not. Though Mr. Mittal has submitted that the action complained against in this writ petition has been undertaken in pursuance of the power under Rule 5A of the 1994 Rules, as we have already observed, the legality of the instruments challenged in this writ petition do not specify the provisions under which such actions have been taken by the revenue authorities. The saving clause itself after omission of the statute does not refer to any particular provision of the Rules. Sub-clause (e) which we have quoted in the preceding part of this order gives a list of actions which are saved.”
Refusing to grant an interim relief to the petitioners, the Court said that “In our prima facie view, the expression “instituted” in sub-clause(e) would imply the proceeding which stood already instituted at the time of repeal or omission of the 1994 Act. 10. In such circumstances, we choose to follow the course taken by the Hon’ble High Courts of Gujarat and Delhi and direct status quo to be maintained till the next date of hearing so far as the proceeding which form the subject matter of the present writ petition is concerned.”
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