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Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Circular No. 181/7/2014-Service Tax
New Delhi, the 10th December, 2014
To,
All Principal Chief Commissioners / Chief Commissioners of Central
Excise/Service Tax
Principal Directors General/ Director General Service Tax/ DGCEI/Systems/ Audit
All Principal Commissioners/Commissioners of Central Excise/Service Tax
All Principal Additional Directors General/ Additional Directors General Audit
Madam/Sir
Sub: Audit of the Service Tax assessees by the officers of Service Tax
and Central Excise Commissionerates
Section 94 of the Finance Act, 1994 deals with rule making powers of the Central
Government in relation to service tax. Sub-section (2) of section 94, dealing
with specific purposes for which rules can be made, was amended with effect from
06.08.2014, vide Section 114(J) of the Finance Act, 2014, and a new clause (k)
was added to sub-section (2) of section 94, which is reproduced below –
“(k) imposition, on persons liable to pay service tax, for the proper levy and
collection of tax, of duty of furnishing information, keeping records and the
manner in which such records shall be verified.”
- In exercise of the rule making powers under clause (k) of sub-section
(2) of section 94 of the Finance Act, 1994, the Central Government has
inserted a new rule 5(A)(2) in the Service Tax Rules, 1994 vide notification
no. 23/2014-Service Tax dated 5th December, 2014. This rule, interalia,
provides for scrutiny of records by the audit party deputed by the
Commissioner. Such scrutiny essentially constitutes audit by the audit party
consisting of departmental officers.
- Verification of records mandated by the statute is necessary to check the
correctness of assessment and payment of tax by the assessee in the present
era of self-assessment. It may be noted that the expression “verified” used
in section 94(2)(k) of the said Act is of wide import and would include
within its scope, audit by the departmental officers, as the procedure
prescribed for audit is essentially a procedure for verification mandated in
the statute.
- It may also be noted that the Hon’ble High Court of Delhi in the judgment
dated 04.08.2014 in the case of M/s Travelite (India)
[2014-TIOL-1304-HC-DEL-ST] had quashed rule 5A(2) of the Service Tax Rules,
1994 on the ground that the powers to conduct audit envisaged in the rule
did not have appropriate statutory backing. This judgment can now be
distinguished as a clear statutory backing for the rule now exists in
section 94(2)(k) of the said Act.
- Departmental officers are directed to audit the Service Tax assessees as
provided in the departmental instructions in this regard. Difficulty, if
any, in implementing the circular may be brought to the notice of the Board.
Hindi version will follow.
(Himani Bhayana)
Under Secretary (Service Tax)
F. No. 137/46/2014-Service Tax
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