Sona Beverages PVT. LTD. vs. Union Of INDIA

Held

The High Court did not decide the merits of the petitioner's contentions regarding the legality of the internal audit. Instead, the Court directed the petitioner to file their objections and reply to the notice within 15 days of receiving a certified copy of the order. The respondent authorities were then directed to consider these objections through a reasoned order, taking into account the grounds raised by the petitioner, including jurisdictional issues. Pending the decision on the petitioner's objections, the effect and operation of the impugned notice were stayed. The Court also noted that if the petitioner failed to file their reply/objection, the order passed by the Court would lose its efficacy. The petition was disposed of with these directions.

Facts

The petitioner, Sona Beverages Pvt. Ltd., filed a writ petition challenging a notice dated July 26, 2017, issued by the Assistant Commissioner (Audit), Central GST and Central Excise. The notice demanded documents and also called for an internal audit to be conducted by departmental officers. The petitioner argued that they were not a Central Excise assessee and that there was no provision under the Service Tax Law or the Finance Act, 1994, for the department to conduct an internal audit. They contended that the only relevant provision, Section 72A of the Finance Act, 1994, allows for a special audit by a Chartered Accountant, not a departmental accountant.

Key Issues

1. Whether the respondent department has the authority to conduct an internal audit of the petitioner under the prevailing laws, specifically the Service Tax Law and the Finance Act, 1994, considering the petitioner is not a Central Excise assessee? (Question of law) 2. Whether the notice dated July 26, 2017, which mandates an internal audit by departmental officers, is legally sustainable? Petitioner's arguments: The petitioner contended that they are not a Central Excise assessee and therefore not subject to the Central Excise Act. They further argued that the Finance Act, 1994, and the Service Tax Law do not contain any provisions empowering the department to conduct an internal audit. The petitioner highlighted that Section 72A of the Finance Act, 1994, permits only a special audit conducted by a Chartered Accountant, which is distinct from the internal audit demanded by the notice. Respondent's arguments: The judgment records no specific arguments from the respondent.