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2021 (2) TMI 12 - HC - Service TaxPower of CAG to conduct service tax audit of private party - Central Excise Revenue Audit (CERA) - Validity of notice intimating that petitioner’s case has been selected for scrutiny / audit - petitioner's primary assertion is that the impugned notice / intimation seeking audit of petitioner's accounts is without jurisdiction i.e it has been issued without invoking the provisions of statutory laws under which a special audit, as purported, can be conducted - interpretation and application of Section 16 of the CAG’s (DPC) Act read with Articles 148, 149 and 151 of the Constitution of India dealing with CAG - HELD THAT:- It may be mentioned that the accounts will be audited by a Chartered Accountant or a Cost Accountant to be appointed by the Commissioner. In Clause (2) to Section 72A, it is stated that the Chartered Accountant or Cost Accountant will submit a report duly signed and certified by him to the Commissioner. In Clause (4), it is stated that the person liable to pay tax shall be given an opportunity of being heard in respect of any material gathered on the basis of the audit under sub-section (1) and proposed to be utilized in any proceeding. Copy of the audit report may be made available to the assessee and a proper opportunity will also be provided to him, as per law. Rule 5A sub-rule (2) states that every assessee shall, on demand, make available to the officer authorised or the audit party, records, trial balance and income-tax audit report, if any. The officer may demand the documents to ensure correctness of the books of accounts and ultimately, the audit will be conducted by the audit party headed by the Chartered Accountant/Cost Accountant, as the case may be, deputed by the Commissioner. It is Commissioner on whose behalf the officer will collect the material and the auditor will perform the audit. In any case, the final report duly signed by the Chartered Accountant will be submitted to the Commissioner. In case of government autonomous bodies, the function of audit has been assigned to CAG - From the above, it is crystal clear that in case of a private assessee, Commissioner will refer the matter to an officer to collect the material or Chartered Accountant for the purpose of audit. Thus, for the purpose of audit, material can be collected either by the officer authorized by the Commissioner or by the auditor himself. But, audit will be performed only by the Chartered Accountant. It is the pious duty of the assessee to make available the record as mentioned in Rule 5A i.e. trial balance or its equivalent; and the Income-tax audit report, if any, under Section 142(2A) of the Income Tax Act, 1961, for the scrutiny of the officer or the audit party, as the case may be. Admittedly, in the present case the impugned notice / intimation dated 10.01.2019 seeking audit of petitioner’s accounts is not contemplated under the provisions of Rule 5A of the Service Tax Rules, 1994. On the contrary, it is the assertion of the respondents that these have been issued under section 16 of CAG’s (DPC) Act. Interpretation and application of Section 16 of the CAG’s (DPC) Act read with Articles 148, 149 and 151 of the Constitution of India dealing with CAG - whether CERA, an audit wing of the Principal Director of Audit (Control), Kolkata under the CAG, has power to and / or authority and / or jurisdiction to audit the account, of the petitioner company under Section 16 of the CAG’s (DPC) Act, where admitedly the petitioner company is not an undertaking of the Central Government or of any State Government and is prely a private entity? - HELD THAT:- It is clear that the statutory responsibility of the CAG is to audit receipts of the Union and States. These receipts include both direct and indirect taxes. It is duty of the Central Excise Revenue Audit (CERA) to see that sums due to the Government are properly assessed, realized and credited to the Government account. The scheme enacted and envisaged in Chapter III of the CAG’s (DPC) Act, 1971 begins with the word “Comptroller or Auditor General to compile accounts of Union and or States.” The statutory scheme clearly states that the CAG shall from the accounts compiled by him or by the Government or any person responsible prepare in each year accounts showing under the respective heads, the annual receipts and disbursement for the purpose of the Union, each State or each Union Territory and shall submit the same to the President or the Governor or the Administrator, as the case may be. It is in such context that the provisions of Section 16 pertaining to audit of all receipts which are payable into the Consolidated Fund of India and each State and of each Union Territory is required to be construed with respect to the accounts maintained in the Government departments / Corporations belonging to the Government. In view of the mandate of Section 16 of the CAG’S (DPC) Act, 1971, CERA audit cannot be extended to call for audit of a private entity such as the petitioner company. Petition allowed.
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