Service tax audit by CAG stayed where saving provisions did not clearly preserve power for fresh proceedings.

Ad interim relief was granted staying the communication directing a Service Tax audit by the CAG, as the Court found a prima facie doubt whether fresh audit proceedings could still be initiated under Rule 5A of the Service Tax Rules, 1994 after repeal and the saving framework under the CGST Act, 2017. The Court held that the authority to compel audit of a private agency through the impugned communication required closer examination, and the saving provisions did not clearly preserve power for fresh proceedings. The CAG was restrained from carrying out any further Service Tax audit of the petitioner.

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Issues: Whether ad interim relief should be granted staying the impugned communication directing Service Tax audit by the CAG.

Analysis: The Court noted the earlier challenge to Rule 5A of the Service Tax Rules, 1994 and observed that, in view of the repeal and saving framework under the Central Goods and Services Tax Act, 2017, there were serious doubts whether fresh audit proceedings could be initiated under the said rule. On a prima facie assessment, the Court found that the power to compel audit of a private agency through the impugned communication required examination, and the saving provisions did not clearly preserve such authority for fresh proceedings.

Conclusion: Ad interim relief was granted and the impugned communication was stayed, with the CAG restrained from carrying out any further Service Tax audit of the petitioner.

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