The Delhi High Court recently declared Rule 5A(2) of the Service Tax Rules, 1994 ultra vires the Finance Act 1994 and struck it down in part.
Rule 5A(2), as amended in terms of Notification No. 23/2014-Service Tax, provided for on demand production of documents to the officers deputed by the Commissioner or Comptroller and Auditor General of India.
A Division Bench of the Court said that Section 72 of the Finance Act, 1994 provided only for the central excise officer to ask for documents. Other sections of the Finance Act also provide for limited power to senior officials and do not allow in general demand by any and all officers.
It is pertinent to note here that a similar Rule 5(A) was inserted by Central Government in 2007 which was struck down by a Division Bench of Delhi High Court for being ultra vires the Finance Act and the same was upheld by Hon’ble Supreme Court of India as well. The new amendment by Central Government again in 2014 was unable to remove the defect.
The Court also declared that Central Board of Excise and Customs latest instructions to be followed by the Audit Commissionerates in this regard are ultra vires the Finance Act.