Hon’ble Delhi High Court grants stay on audit proceedings initiated by Service Tax Department

The Hon’ble Delhi High Court, has in the case of GeetanjaliYog LLP v. Union of India in W.P. (C) 13531/2019 issued notice and granted interim relief to the Petitioner on their plea that the power of initiating Audit proceedings for verification of documents and records are not provided for in the Finance Act.

The grievance of the Petitioner arose out of the impugned letter dated 01.11.2019 issued by the Assistant Commissioner, Audit carrying out EA-2000 Audit, demanding documents from the Petitioner LLP and deputing Audit Team comprising of officers in the rank of Superintendent and Inspector. The challenge was made on following grounds:

  • Rule 5A of the Service Tax Rules travels outside the scope of its parent statute.
  • The EA-2000 Audit proposed to be conducted by the Respondents purportedly in exercise of power under Rule 5A (2) of the Service Tax Rules, is liable to be quashed for being carried out without aid of any express statutory provisions.
  • Further, the Assistant Commissioner has no power to take any action because of omission of the Chapter V of the Finance Act, 1994, in circumstances whereby Section 174(2) has not saved any power of service tax officer to initiate Audit proceedings.

The Hon’ble Court was pleased to grant stay of proceedings consequent to the impugned letter.

The order was passed by Hon’ble Bench comprising of Hon’ble Mr. Justice Vipin Sanghi and Hon’ble Mr. Justice Sanjeev Narula.

Petitioner was represented by Advocate Puneet Agrawal with Advocate Gaurav Gupta.

Expert Comments: Anubhav Gupta, Manager ALA Legal

The order of the Hon’ble High Court granting interim stay on Service Tax Audits provides a major relief to the taxpayers where such audits have been initiated by the Department without having any express powers in the Law to do so. Thus, it reduces duplicity of work and preserves precious time & effort of the Assessee.

– Team ALA Legal

GST Law India is a blog on GST and allied commercial laws managed by members of the law firm ALA Legal.

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