Service tax demand Notice on Legal Services by Senior Advocate set aside

Madhu Sudan Mittal Vs Union of India (Jharkhand High Court)

Conclusion: Demand notice issued by the tax authorities to a Senior Advocate seeking payment of service tax on legal services provided by him to a legal firm was set aside as Notification No.30/2012-ST dated 20.06.2012 had been amended by way of substitution by virtue of two consecutive notifications, i.e., Notification No. 18/2016-ST dated 01.03.2016 and Notification No.34/2016-ST dated 06.06.2016, and since these amendments had been made by way of substitution, the said amendments would be applicable from the date of the original document i.e., from the date of issuance of Notification dated 20.06.2012, therefore, legal services provided by a Senior Advocate for the period from 01.04.2016 to 05.06.2016 was held to be not sustainable in the eyes of law.

Held: The writ petitioner happened to be a Senior Advocate practicing in this Court and being aggrieved with the Notification No. 18/2016-ST dated 01.03.2016 as under Annexure-3 and Notification No. 9/2016-ST dated 1.3.2016 as under Annexure-4 to the extent that it sought to recover service tax directly from Senior Advocates for the legal services provided by them and to the further extent that it envisaged the relationship between a Senior Advocate and an advocate / firm as that of a client and counsel. Writ petitioner, submitted that Notification No.30/2012-ST dated 20.06.2012 had been amended by way of substitution by virtue of two consecutive notifications, i.e., Notification No. 18/2016-ST dated 01.03.2016 and Notification No.34/2016-ST dated 06.06.2016, and since these amendments had been made by way of substitution, the said amendments would be applicable from the date of the original document i.e., from the date of issuance of Notification dated 20.06.2012, and in that view of the matter, the demand notice issued by the authority, which was impugned in this writ petition, was not fit to be sustainable. The writ petitioner, being aggrieved with the terms of amendment notification by which the respondents had arbitrarily and unreasonably sought to recover service tax directly from Senior Advocates for the legal services provided by them, had approached to this Court by filing writ petition under Article 226 of the Constitution of India. It was held that since both the amendments were by way of substitution and the amendment by way of substitution related back to the original document, as had been held by Hon’ble Apex Court in Zile Singh v. State of Haryana (Supra) and Government of India and Others v. Indian Tobacco Association [(2005) 7 SCC 396], both the amendments by way of substitution of the provision as contained in the original notification will be deemed to have applicable with effect from the date of notification dated 20.06.2012. Since both the amendments relate back to the original document,, the demand notice issued by the authority concerned for payment of service tax on legal services provided by a Senior Advocate for the period from 01.04.2016 to 05.06.2016 was held to be not sustainable in the eyes of law. In consequence thereof, the demand notice was quashed and set aside.

FULL TEXT OF THE JUDGMENT/ORDER OF JHARKHAND HIGH COURT

Heard the parties.

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