Legal History: Various judicial pronouncements have been made recently in the context of service tax audits. Reliance in this regard may be placed on :
ACL Education Centre Pvt. Ltd. & Ors. Vs. Union of India [2014-TIOL-120-HC-ALL-ST] – Hon’ble Allahabad High Court held that audit under service tax is to be conducted by Chartered Accountants/ Cost Accountants only and not by officers of the Department
SKP Securities Ltd. Vs. DD (RA-IDT) & Ors. [2013-TIOL-38-HC-KOL-ST] – Hon’ble Kolkata High Court held that audit of private assessee can’t be undertaken by CAG .
Travelite (India) Vs. Union of India & Ors.- Hon’ble Delhi High Court held that rule 5A(2) is bad in law.
Amendment:
Vide Notification No. 23/2014- ST dated- 05.12.2014, CBEC has amended rule 5A(2) and the pronouncement of Allahabad High Court has been followed principally & CAs/CMAs have been made empowered to conduct service tax audits.
Furthermore, earlier limit of 15 days for production of specified documents has now been replaced with the time limit specified by the concerned audit party/CAG/CAs/CMAs, as the case may be.
The said notification is as follows :-
NOTIFICATION No. 23/2014-SERVICE TAX
Dated- 5th December, 2014
G.S.R. (E).- 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.
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.”
(Himani Bhayana)
Under Secretary to the Government of India
[F.No 137/46/2014-Service Tax]
Note:- The principal rules were published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i) vide
notification No. 2/94-SERVICE TAX,
dated the 28th June,
1994 vide number G.S.R. 546 (E), dated the 28th June, 1994 and last amended vide notification No.19/2014-SERVICE TAX, dated the 25th August, 2014 vide number G.S.R. 614 (E), dated the 25th August, 2014.