Delhi High Court - Orders
Ktc (India ) Pvt.Ltd vs Commissioner Of Central Gst Audit-Ii ... on 11 October, 2023
Author: Yashwant Varma
Bench: Yashwant Varma, Dharmesh Sharma
$~38 to 49
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ W.P.(C) 13325/2018
KTC (INDIA ) PVT.LTD ..... Petitioner
Through: Mr. Karan Aggarwal, Adv.
versus
COMMISSIONER OF CENTRAL GST AUDIT-II DELHI &
ANR. ..... Respondents
Through: Mr. Anurag Ahluwalia, CGSC
for R-3
39
+ W.P.(C) 2138/2019 and CM APPL. 19531/2023 (Directions)
M/S T.R. SAWHNEY MOTORS PVT.LTD. ..... Petitioner
Through: Mr. J.K. Mittal, Mrs. Vandana
Mittal and Ms. Aashna Suri,
Advs.
Mr. R.R. Jangu, Adv.
versus
UNION OF INDIA & ANR. ..... Respondents
Through: Mr. Siddharth Khatana, Sr.
Panel Counsel
40
+ W.P.(C) 2311/2019 and CM APPL. 37409/2021 (Early
Hearing), CM APPL. 10762/2019 (Stay)
M/S NVM DESIGN AND CONTRACTS PVT. LTD
..... Petitioner
Through: Mr. Karan Aggarwal, Adv.
versus
COMMISSIONER OF CENTRAL GST AUDIT -I DELHI &
ORS. ..... Respondents
Through: Mr. Anurag Ahluwalia, CGSC
for R-3
41
+ W.P.(C) 2479/2019 and CM APPL. 19590/2023 (Directions)
M/S SERVICES INTERNATIONAL LIMITED ..... Petitioner
Through: Mr. J.K. Mittal, Mrs. Vandana
Mittal and Ms. Aashna Suri,
Advs.
versus
UNION OF INDIA & ANR. ..... Respondents
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:30
Through:
42
+ W.P.(C) 5928/2019 and CM APPL. 9162/2022 (For Vacation of
Stay), CM APPL. 19587/2023 (Directions)
M/S.KOENIG SOLUTIONS PVT. LTD. ..... Petitioner
Through: Mr. J.K. Mittal, Mrs. Vandana
Mittal and Ms. Aashna Suri,
Advs.
versus
UNION OF INDIA & ORS. ..... Respondents
Through: Appearance not given.
43
+ W.P.(C) 8161/2019 and CM APPL. 654/2022 (Early Hearing),
CM APPL. 33801/2019 (Stay)
M/S TRAVLITE (INDIA) ..... Petitioner
Through: Mr. Karan Aggarwal, Adv.
versus
COMMISSIONER OF CENTRAL GST AUDIT-II DELHI &
ANR. ..... Respondents
Through:
44
+ W.P.(C) 11269/2019 and CM APPL. 46453/2019 (Stay)
M/S NETCO CABLES INDUSTRIES (P) LTD ..... Petitioner
Through: Mr. Raj Kumar Phillips and Mr.
Apoorv Phillips, Advs.
versus
ASSISTANT COMMISSIONER (CIRCLE-9) AND ORS
..... Respondents
Through: Ms. Sonu Bhatanagar, Sr.
Standing Counsel with Ms.
Monica Benjamin and Ms.
Nishta Mittal, Advs. for R-
1,2,3,4 and 5
Mr. T.P. Singh, Sr. Central
Govt. Counsel for UOI
45
+ W.P.(C) 13531/2019 and CM APPL. 54802/2019 (Stay), CM
APPL. 6802/2022 (Vacation of Stay)
M/S GEETANJALI YOG LLP ..... Petitioner
Through: Appearance not given.
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:30
versus
UNION OF INDIA & ORS. ..... Respondents
Through: Appearance not given.
46
+ W.P.(C) 8610/2019 and CM APPL. 35560/2019 (Stay), CM
APPL. 3612/2022 (Vacation of Stay)
ARUSHI EXPORTS ..... Petitioner
Through: Mr. Rajat Navet and Mr. Shashi
Kant, Advs.
versus
UNION OF INDIA AND ANR. ..... Respondents
Through: Mr. Vivek Goyal, CGSPC with
Mr. Gokul Sharma and Mr.
Shivam Singh, Advs. for R-
1/UOI
47
+ W.P.(C) 9264/2019 and CM APPL. 13816/2022 (Vacation of
Stay)
SOLVINA INDIA PVT. LTD. ..... Petitioner
Through: Appearance not given.
versus
UNION OF INDIA AND ORS. ..... Respondents
Through: Mr. Tanveer Ahmed Ansari, Sr.
Panel Counsel
48
+ W.P.(C) 9551/2019
NDTV CONVERGENCE LTD ..... Petitioner
Through: Mr. Tushar Jarwal, Mr. Rahul
Sateeja and Mr. Pranav Bansal,
Advs.
versus
UNION OF INDIA & ORS ..... Respondents
Through: Mr. Anurag Ahluwalia, CGSC
for R-3
49
+ W.P.(C) 9640/2021
M/S CLINTUS NETWORK LIMITED ..... Petitioner
Through: Mr. Vivek Sood, Sr. Adv. with
This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above.
The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:31
Ms. Seema Bengani and Mr.
Saurabh Agarwal, Advs.
versus
UNION OF INDIA AND ORS & ANR. ..... Respondents
Through: Mr. Neeraj, SPC with Mr.
Vedansh Anand and Mr. Sahaj
Grag, Advs. for UOI/R-1
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE DHARMESH SHARMA
ORDER
% 11.10.2023
1. This batch of matters had been taken up for expeditious hearing bearing in mind the disclosures that were made in CM APPL. 9162/2022 filed in W.P(C) 5928/2019. The respondents in that application had sought vacation of the interim stay granted on 27.05.2019 and in terms of which proceedings proposed to be initiated in terms of Rule 5A(2) of the Service Tax Rules, 1994 ['1994 Rules'] had been placed in abeyance.
2. As we had noticed in the previous orders passed in this batch, Rule 5A (2) of the 1994 Rules, and in terms of which an audit or inspection was sought to be initiated by an officer authorized by the Commissioner of Central Excise or the audit party deputed by the Commissioner or the Comptroller and Auditor General, had come to be struck down by the Division Bench of this Court in Travelite (India) v. Union of India & Ors1.
3. Thereafter and post the judgment in Travelite, Section 94(2) of the Finance Act, 19942 was amended by inserting clause (k) therein. Clause (2)(k) of S.94 of the Act is extracted hereinbelow for ease of reference:
12014 SCC Online Del 3943 2 the Act This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:31 "(2) In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters, namely: --
xxx xxx xxx
(k) imposition, on persons liable to pay service tax, for the proper levy and collection of the tax, of duty of furnishing information, keeping records and the manner in which such records shall be verified;"
4. Undisputedly, by placing reliance on S.94(2)(k) read with S.94(1) of the Act, the power of conducting audit and inspection under Rule 5A(2) was sought to be revived vide the Service Tax (Third Amendment) Rules, 2014 dated 05.12.2014. However, it is pertinent to note that the power to conduct a special audit and the conditions precedent prescribed in S.72A of the Act remained untouched.
5. Analysing the aforenoted amendments, the Division Bench of this Court in Mega Cabs Private Limited v. Union of India & Ors3, held that Rule 5A(2) as amended goes beyond the scope of the provisions provided under the Act and struck down the said Rule, insofar as it authorized officers of the Service Tax Department, audit parties deputed by the Commissioner or the Comptroller and Auditor General to conduct an audit and inspection by seeking production of documents.
6. The respondents have, however, drawn our attention to two decisions rendered subsequent thereto in Aargus Global Logistics Private Limited v. Union of India & Anr4 and Vianaar Homes Private Limited v. Assistant Commissioner, Central Goods and Services Tax & Ors5.
7. It becomes relevant to note that the Division Bench in Aargus apart from upholding the validity of Rule 5A(2), saved notices for 3 2016 SCC Online Del 3630 4 2020 SCC Online Del 2295 5 2020 SCC Online Del 1394 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:31 audit issued under that provision with respect to the period 2014-15 to 2017-18 (June 2017), post the enactment of the Central Goods and Services Tax Act, 20176, by placing reliance upon the saving clause, provided in S.174(2) of the CGST Act. Similarly, the Division Bench in Viannar affirmed the decision in Aargus and saved audit notices issued under Rule 5A(2) with respect to FY 2014-15 to FY 2016-17 (up to June 2017), post the enactment of the CGST Act. As is evident from the aforesaid, the Court in Aargus and Viannar answered the said question in favour of the Department.
8. There however appears to be an apparent conflict between the decisions rendered in Travelite, Megacabs on the one hand and Aargus on the other. While Rule 5A(2) of the 1994 Rules had been explicitly struck down in the former decisions, Aargus in particular upheld the validity of that Rule and additionally held that it would stand saved by virtue of Section 174(2) of the CGST Act. Viannar, while not independently upholding the validity of Rule 5A had followed the principles enunciated in Aargus and reaffirmed its conclusions resting on Section 174(2).
9. It becomes pertinent to note that both Aargus as well as Viannar have proceeded on the assumption as if Rule 5A(2) still existed on the statute book and validly operated, until the coming into effect of the CGST Act. Further, on a detailed examination of Viannar and Aargus, it is significant to note that the decisions in Travelite and Mega Cabs were neither cited nor considered by the Court in those judgments.
10. Undisputedly, the Department has preferred Special Leave Petitions insofar as the decisions in Travelite and Mega Cabs are concerned and on which an interim order operates to the effect that the 6 CGST Act This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:31 operation of those judgments has been placed in abeyance by the Supreme Court. It is in the aforesaid context that learned counsels appearing for the petitioners would contend that the interim order of the Supreme Court would not amount to effacing the declaration of invalidity, insofar as it came to be rendered in Travelite and Mega Cabs. In any case it was their submission that the order of stay would not amount to a revival of Rule 5A(2).
11. In the meantime, and in light of the order of the Supreme Court staying the judgements in Travelite and Megacab and in light of the judgment in Aargus, fresh notices have been issued by the respondents.
12. Before proceeding further, we must note a submission addressed on behalf of some of the petitioners who had urged us to place all proceedings on the writ petition in abeyance in light of the interim order passed by the Supreme Court and bearing in mind the judgment of the Supreme Court in D.K. Trivedi and Sons & Ors v. State of Gujarat & Ors7. On the basis of the above, it was urged that this Court should await judgment being rendered by the Supreme Court. The said contention was vehemently opposed by the respondents who submitted that the interim order of the Supreme Court does not detract from the right of the Court to consider the questions that arise. This more so, according to the respondents, especially in light of the judgment in Aargus and which has upheld the validity of Rule 5A(2). According to the respondents, the position cannot be left in a limbo merely because an appeal is pending in the Supreme Court. The respondents have also referred to the interim orders operating in the present writ petitions since long and thus 7 1986 (Supp) SCC 20 This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:31 causing grave prejudice to the Department.
13. This Court notes that D.K. Trivedi was dealing with a situation where the High Court had dismissed petitions solely on the ground that similar matters were pending before the Supreme Court. It was in that backdrop that the Supreme Court in D.K. Trivedi held that the High Court had erred in dismissing the writ petition, and it should have granted liberty to the petitioner there to approach or intervene before the Supreme Court.
14. We note that the declaration of invalidity as rendered by this Court in Travelite and Mega Cabs does not stand effaced merely because those judgments have been stayed. The stay order passed by the Supreme Court would not, in any case, revive the provision itself. We are in any case faced with conflicting decisions which rule upon the validity of Rule 5A(2). This has led to a position of flux with parties being left in a state of uncertainty with respect to the validity of Rule 5A(2). Additionally, the respondents appear to have proceeded to issue notices referable to that provision in light of the judgment in Aargus. This position of uncertainty cannot be permitted to prevail merely because appeals in respect of Travelite and Mega Cabs are pending before the Supreme Court. The Court has before it the judgments in Travelite and Megacabs on the one hand and the judgment of Aargus on the other. There thus appears to be ample justification for the Court to render a definitive opinion on Rule 5A(2), notwithstanding the pendency of the appeals before the Supreme Court.
15. In light of the aforesaid and considering the fact that there is an apparent conflict between the decisions in Travelite and Mega Cabs vis-à-vis the decision in Aargus, which was subsequently affirmed in This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:32 Viannar, and acceding to the Petitioners' contention that an interim order would not efface the validity of a decision, we deem it appropriate to order that the present batch of matters be referred to a larger Bench of this Court.
16. In this light, we place the present batch of matters before the Hon'ble Chief Justice, for constituting an appropriate Bench in order to consider the following questions which appear to arise:
A. Whether Aargus which upholds the validity of Rule 5 A(2) was correctly decided?
B. Whether the views expressed in Travelite and Megacabs require reconsideration in light of the above?
17. Interim orders granted earlier to continue till the next date of hearing.
YASHWANT VARMA, J.
DHARMESH SHARMA, J.
OCTOBER 11, 2023/SS/RW This is a digitally signed order.
The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 14/10/2023 at 15:05:32