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ST - Audit - It would be iniquitous to allow respondents to proceed on basis of provisions struck down by High Court, against petitioner: HC

 

By TIOL News Service

KOLKATA, JULY 20, 2018: BY this Writ Petition filed in the year 2015, the petitioner sought a declaration that sub-rule (2) of Rule 5A of the Service Tax Rules, 1994 as substituted by notification no. 23/2014-ST dated December 05, 2014 is arbitrary and in conflict with provisions of Section 72A of the Finance Act, 1994.

The petitioner also sought a declaration that, the provisions of clause (k) of sub-section (2) of Section 94 of the Finance Act, 1994 is unguided and gives uncontrolled power of delegation.

The third prayer is with regard to a notice dated February 16, 2015.

It is submitted that the issue of vires of similar provisions of the Finance Act, 1994 initially came up for consideration before the Delhi High Court in Travelite (India) Vs. Union of India - 2014-TIOL-1304-HC-DEL-ST and it was held that such provisions were to be held ultra vires and an appeal is pending against such judgment before the Supreme Court of India; that subsequently, the provisions as impugned in the present writ petition were introduced and which too were struck down by the Delhi High Court in Mega Cabs Pvt. Ltd. Vs. Union of India - 2016-TIOL-1061-HC-DEL-ST. Inasmuch as since the provisions have been struck down, the notice impugned herein issued on such basis needs to be quashed also.

The High Court considered the submissions and inter alia observed -

++ It appears that, Rule 5A was introduced by a notification dated December 28, 2007. Such notification inserting Rule 5A was challenged before the Delhi High Court in Travelite (India) (supra). Such provisions were struck down in Travelite (India) (supra). The same provisions as that involved in the present writ petition were assailed before the Delhi High Court in Mega Cabs Pvt. Ltd. (supra). Such provisions were also struck down. Appeals are pending against the judgment and order passed in Travelite (India) (supra) as well as Mega Cabs Pvt. Ltd. (supra). Till such time there is a decision in the appeals, the provisions stand struck down by the Delhi High Court. Therefore, it would be iniquitous to allow the respondents to proceed on the basis of provisions struck down by a High Court, against the petitioner . The impugned notice dated February 16, 2015 is, therefore, quashed.

++ So far as the declaration of ultra vires of sub-rule (2) of Rule 5A of the Service Tax Rules, 1994 as substituted by the notification dated December 5, 2014 is concerned, it would be appropriate to follow Mega Cabs Pvt. Ltd. (supra). The respondents have not brought to the notice of the Court any relevant fact or law which may have weighed in the Court in taking a contrary view. In absence of such assistance, Mega Cabs Pvt. Ltd. (supra) is followed.

The Writ Petition was disposed of.

In passing:

Incidentally, the Delhi High Court order in Travelite (supra) was stayed by the Supreme Court - 2014-TIOL-101-SC-ST-LB on 18 December 2014.

Also see Board Circular 181/7/2014-ST dated 10 December 2014.

(See 2018-TIOL-1400-HC-KOL-ST)


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