The Delhi High Court has ruled that the Service Tax Audit under Goods and Service Tax (GST) is permissible.

The petition was filed by Aargus Global Logistics Pvt. Ltd on the ground that Section 174(2)(e) of the Central Goods and Service Tax (CGST) Act, 2017, which specifically empowers the authorities to institute any inquiry, investigation, verification, assessment proceedings, adjudication, etc. under Rule 5A of the Service Tax Rules.

The petitioner namely Aargus Global Logistics Pvt. Ltd. is a company who is engaged in the business of providing freight forwarding services to its clients. It has offices across the country, including in Delhi, Gujarat, Haryana, Karnataka, etc. For the purpose of service tax, the Petitioner had a centralized registration with the service tax department at Delhi. The petitioner contended that the authorities are not empowered to institute any inquiry, investigation, verification, assessment proceedings, adjudication, etc. The petitioner also contended that there is no provision in Section 174 to save the Service Tax Rules, as it is only Chapter V of the Finance Act, 1994 which has been saved for the specific purposes mentioned in Clauses (a) to (f) of Section 174 (2) and that failure of the Parliament to mention the word “Rules”, along with the Finance Act, 1994 in Section 174 (2), means that the Service Tax Rules were not saved even for the purpose of enforcing the saving provisions, is held to be completely meritless.

The issue raised in this case was whether the authorities were empowered to conduct a service tax audit or not under GST?

The division bench of High Court of Delhi consisting of Justice Vipin Sanghi and Justice Sanjeev Narula held that Section 174(2)(e) of the Central Goods and Service Tax (CGST) Act, 2017, which specifically empowers the authorities to institute any inquiry, investigation, verification, assessment proceedings, adjudication, etc. under Rule 5A of the Service Tax Rules.