Clarification on Service Tax Audit

The CBEC has clarified vide Circular No.  181/7/2014 - Service Tax dated 10^th December, 2014 that the Delhi High Court ruling in M/s Travelite (India) Ltd. [2014 (35) S.T.R. 653], quashing Rule 5A(2) of the Service Tax Rules on grounds of having no Statutory Back Up, is now distinguishable as clear statutory backing for new Rule 5A(2) of Service Tax Rules exists in section 94(2)(k) of the Finance Act, 1994. [Section 94(2) was amended w.e.f.

06.08.2014 after The President’s assent on the Finance Bill (No. 2)].

However, time only may clarify if the judiciary would consider such amendment to suffice the constitutional validity of Rule 5A(2) when even scope of Section 72A has been disputed in the referred High Court decision.

Further, CBEC has amended Rule 5A(2) of Service Tax Rules, 1994 vide Notification No. 23/2014- Service Tax dated 05.12.2014 and substituted the said sub-rule as under:

(2) Every assessee, shall, on demand make available to the officer empowered under sub- rule (1) or the audit party deputed by the Commissioner or the Comptroller and Auditor General of India, or a cost accountant or chartered accountant nominated under section 72A of the Finance Act, 1994;-

(i)      the records maintained or prepared by him in term of sub-rule (2) of Rule 5;

(ii)     the cost audit reports, if any, under section 148 of the Companies Act, 2013 (18 of 2013); and

(iii)    the income-tax audit report, if any, under section 44AB of the Income-tax Act, 1961 (43 of 1961),

for the scrutiny of the officer or the audit party, or the cost accountant or chartered accountant, within the time limit specified by the said officer or the audit party or the cost accountant, as the case may be.

The circular/ notification is attached herewith for your reference.