It is pertinent to note that very recently , the Honourable High Court of Delhi in the case of Travelite (India) vs. UOI & Ors, while quashing Rule 5A(2) of the Service Tax Rules and the CBEC Instructions prescribing the manner of an audit and the records that can be called for by the authorities, held that
“Section 74A prescribes the conditions meriting such special audit compels the necessary inference that the Parliament did not intend to provide for a general audit that “every assessee” may be subjected to, “on demand”. This Court is thus of the opinion 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) must consequently be struck down.
Before , it was struck down it read as below
Rule 5A (2) Every assessee shall, on demand, make available to the officer authorised under sub-rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, within a reasonable time not exceeding fifteen working days from the day when such demand is made, or such further period as may be allowed by such officer or the audit party, as the case may be,- (i) the records as mentioned in sub-rule (2) of rule 5; (ii) trial balance or its equivalent; and (iii) the income-tax audit report, if any, under section 44 AB of the Income-tax Act, 1961 ( 43 of 1961), for the scrutiny of the officer or audit party, as the case may be.’’.
It compelled the Government to come out with an amendment in Rule 5A(2) of Service Tax Rules , 1994. The Rule 5 A (2) is re-introduced under Notification No. 23/2014-ST dated 05.12.2014 , as below
23/2014-SERVICE TAX, Dated: December 05, 2014
In exercise of the powers conferred by clause (k) of sub-section (2), read with sub-section (1) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules further to amend the Service Tax Rules, 1994, namely:-
1. (1) These rules may be called the Service Tax (Third Amendment) Rules, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. In the Service Tax Rules, 1994, in rule 5A, for sub-rule (2), the following sub-rule shall be substituted, namely:-
“(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.”
[F.No 137/46/2014-Service Tax]
(Himani Bhayana) Under Secretary to the Government of India