M/S Engineers INDIA Limited vs. Union Of INDIA & Ors.

Facts

The petitioner, M/s Engineers India Limited, filed a writ petition before the Delhi High Court challenging a notice dated August 24, 2023, directing a special audit under Section 66 of the Central Goods and Services Tax Act, 2017 (CGST Act). The respondents, Union of India and others, submitted that the challenge to the special audit direction had become infructuous. This was because the audit had already been conducted, a report submitted, and a show cause notice under Section 73 of the CGST Act had been issued to the petitioner pursuant to the audit findings. The petitioner's counsel then sought leave to withdraw the petition.

Held

The Court noted the submission by the respondents that the challenge to the special audit direction had become infructuous as the audit had been completed and a show cause notice under Section 73 of the CGST Act had been issued. The petitioner's counsel then sought leave to withdraw the petition, reserving the right to challenge the audit's validity, the constitutional validity of Section 66 of the CGST Act, and the show cause notice. In light of the petitioner's request and the respondents' submission regarding the audit's completion, the Court dismissed the petition as withdrawn. All rights and contentions of the parties were expressly reserved for future proceedings. The Court did not decide on the validity of the special audit or the show cause notice, nor did it rule on the constitutional validity of Section 66 of the CGST Act.

Key Issues

1. Whether the challenge to the direction for a special audit under Section 66 of the CGST Act is rendered infructuous due to the subsequent completion of the audit and issuance of a show cause notice under Section 73 of the CGST Act? Petitioner's Argument: The petitioner sought to withdraw the petition with liberty to take appropriate proceedings, reserving their right to challenge the validity of the audit, the constitutional validity of Section 66 of the CGST Act, and the validity of the show cause notice issued consequent to the audit. This implies a desire to address these issues in subsequent proceedings. Respondents' Argument: The respondents contended that the challenge to the special audit direction had become infructuous because the audit had already been completed and a show cause notice had been issued. They did not explicitly argue on the merits of the special audit itself but rather on the procedural development rendering the current challenge moot.