2019 (1) TMI 917 - HC - Service Tax

Jurisdiction upheld for audits post-repeal of Finance Act 1994; Parties to submit affidavits.

The court denied the petitioners' request for interim relief, ruling that authorities have the jurisdiction to conduct audits under the Finance Act, 1994, ... Section 173 - omission of Chapter V of the Finance Act, 1994 - Section 174 - repeal and saving of investigations, enquiries, verification and legal proceedings - Saving and repeal provisions - Continuance of audit or investigation for periods when pre repeal law applied - Validity of exercise of jurisdiction under repealed Act for pre repeal periodsSection 173 - omission of Chapter V of the Finance Act, 1994 - Section 174 - repeal and saving of investigations, enquiries, verification and legal proceedings - Continuance of audit or investigation for periods when pre repeal law applied - Whether the authorities were without jurisdiction to issue notices proposing an audit under Chapter V of the Finance Act, 1994 after commencement of the Central Goods and Services Tax Act, 2017, and whether interim relief should be granted. - HELD THAT: - Section 173 of the Act of 2017 omits Chapter V of the Finance Act, 1994 save as otherwise provided in the Act of 2017. Section 174 contains repeal and saving provisions which, in sub section (2), preserve the continuance or institution of investigations, enquiries, verifications (including scrutiny and audit), assessment proceedings, adjudication and other legal proceedings in respect of matters under the repealed or amended Acts as if those Acts had not been repealed. Construed together, the omission of Chapter V does not, by itself, bar an enquiry or audit that concerns periods when the Act of 1994 was in force, because Section 174 expressly saves such investigations and proceedings. On a prima facie reading, therefore, the authorities proposing to undertake an audit for periods when the Act of 1994 applied are entitled to do so. In view of this legal position and in light of intervening appellate orders in related matters remanding issues for fresh consideration, the Court is not minded to grant the interim relief sought by the petitioners.Interim relief refused; authorities entitled prima facie to proceed with audit under the pre repeal law for periods when it applied.Final Conclusion: The petition for interim relief is declined on the basis that the saving provisions in Section 174 permit continuance of audits and related proceedings under the pre repeal Act for relevant periods; parties are permitted to file affidavits and the matter is listed for hearing in the Monthly Combined List of March, 2019. Issues:Challenge to notice and reminders issued without jurisdiction for audit under Chapter V of the Finance Act, 1994 post its repeal by the Central Goods and Services Tax Act, 2017.Analysis:The petitioners challenge a notice and reminders issued for an audit under Chapter V of the Finance Act, 1994 after its repeal by the Central Goods and Services Tax Act, 2017. The petitioners argue that the authorities lack jurisdiction to conduct such an audit as the Act of 2017 omits Chapter V of the Finance Act, 1994. They cite relevant legal provisions and previous judgments to support their claim for stay. The respondents, however, argue that previous challenges under Rule 5A of the Service Tax Rules, 1994 were set aside and remanded for fresh consideration, urging the court not to grant interim relief based on these precedents.The petitioners clarify that their challenge is not against Rule 5A of the Service Tax Rules, 1994 but against the lack of jurisdiction of the authorities to conduct an audit under the Service Tax Act, 1994 post the Act of 2017. They highlight that previous judgments related to Rule 5A challenges were remanded for fresh consideration, keeping all points open for decision. The interim orders cited by both parties are distinguished based on the specific challenges raised in those cases.The court delves into the provisions of Sections 173 and 174 of the Act of 2017, which deal with the amendment and repeal of previous acts. Section 173 omits Chapter V of the Finance Act, 1994, unless otherwise provided in the Act of 2017. Section 174 repeals various statutes but saves pending investigations, enquiries, and legal proceedings, allowing them to continue as if the previous acts had not been repealed. The court finds that these sections permit enquiries, investigations, and legal proceedings under the Act of 1994 even after the Act of 2017 came into effect, allowing the authorities to conduct the audit for the relevant period.In conclusion, the court refuses to grant interim relief, stating that the authorities are entitled to undertake the audit under the Act of 1994 for the applicable period. The parties are directed to file affidavits, and the case is listed for hearing in the upcoming month.