Order Date – 29 August 2023

Parties: M/s T.R. Sawhney Motors Pvt. Ltd. Vs Union of India & Anr.

Facts – 

• The Petitioner, M/s T.R. Sawhney Motors Pvt. Ltd., received a letter dated 20 February 2019 which purports to initiate proceedings for verification/audit of records and documents.
• It was submitted that Rule 5A(2) of the Rules and in terms of which audit and inspection is sought to be initiated came to be struck down as being ultra vires the Act by a Division Bench of our Court in Travelite (India) v. Union of India.

Issue – 

• Whether Rule 5A of the Service Tax Rules 1994 is ultra vires the provisions of the Finance Act 1994 and Central Goods and Services Tax Act 2017?

Order – 

• The Divisional Bench of Hon’ble High Court observed that once the Act came to be repealed consequent to the advent of CGST, an issue appears to have been addressed with respect to the validity of proceedings pending or to be initiated under the Rules. This Court was called upon by the respondents to hold that the proceedings initiated under Rule 5A(2) and which may pertain to or be pending on the date when CGST came into effect would stand saved by virtue of Section 174 of the CGST.
• The Division Benches of this Court in Aargus Global Logistics Private Limited v. Union of India & Anr and Vianaar Homes Private Limited v. Assistant Commissioner, Central Goods and Services Tax & Ors proceeded to accept the submission addressed on behalf of the respondents and held that the proceedings which had already been initiated or which related to a period prior to the repeal of the Act would stand saved.
• However, it appears that the decisions in Travelite and Mega Cabs were not brought to the notice of the Division Benches and the matters appear to have been argued as if Rule 5A continued to exist on the statute book. That would clearly appear to be a factual inaccuracy.
• Hence it was held that prima facie of the opinion that notwithstanding the judgments in Travelite and Mega Cabs having been placed in abeyance, the declaration of invalidity would not stand effaced.