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2014 (12) TMI 595 - HC - Service TaxConstitutional validity of levy of service tax on Advocates and legal services - Scope within the negative list and earlier under section 65(105) (zzzzm) of the Finance Act, 1994 as inserted by the Finance Act, 2011 - interference of function of advocate profession - Held that:- The legislature by inserting such provision has neither interfered with the role and function of an advocate nor has it made any inroad and interference in the constitutional guarantee of justice to all. The services provided to a individual client by a individual advocate continues to be exempted from the purview of the Finance Act and consequently Service Tax but when an individual advocate provides service or agrees to provide services to any business entity located in the taxable territory, then, he is included and liable to pay Service Tax. - That is because the legislature was aware that poor and needy section of the population requires advice, consultancy or assistance in any branch of law, if he requires legal advice, aid and assistance, then, that should be available to him at times immediately and cheaply. What holds good for chartered accountants and architects must equally apply to other professionals such as advocates, and who too are well conscious of their status. The manner in which the services of lawyers and advocates are rendered has been a subject matter of a decision in the case of disciplinary action initiated by Bar Council of Maharashtra against a professional. The classification between service provided to business entities and individuals cannot be said to be illusory. The classification has a definite nexus and with the object sought to be achieved. If that is to explore and expand the sources of revenue and by widening the tax net, then, it is achieved by bringing within the fold the aforementioned services. There is, therefore, no violation of the constitutional mandate. The classification cannot be termed as arbitrary, discriminatory, unfair, unreasonable and unjust. Incidentally, we may observe that no material has been placed before us by the Petitioners which would indicate that for a brief period from the time the impact of levy of service tax fall on them and until the issuance of the notification number 30 of 2012 dated 20th June, 2012 the Advocates suffered in any manner and particularly pointed out in Epari Chinna Krishna Moorthy's case (1964 (3) TMI 55 - SUPREME COURT OF INDIA). - Such advocates are claiming that this Notification of 20th June, 2012 bearing No.30/2012 be given a retrospective effect. It is not possible to accept this argument because the categories of advocates mentioned in these Notifications cannot claim an exemption from the tax and as of right. Article 39A not only includes free legal aid by the appointment of counsel for litigants but also includes ensuring that justice is not denied to litigating parties due to financial difficulties. That aspect is taken care of in the present tax set up by excluding from the tax net the individual litigants and services provided to them by individual advocates. Therefore, there is no infraction of the constitutional mandate. Scope of Mega Notification No.25/2012 dated 20th June, 2012 - Held that:- Now, the services provided by individuals as an advocate or a partnership firm of advocates by way of legal services to any person other than a business entity or a business entity with a turnover upto ₹ 10 lakhs in the preceding financial year are exempt from the whole of the service tax leviable thereon under section 66B of the Finance Act. Therefore, the small businessman, petty traders and persons carrying on business in individual capacity would be able to afford the services of individual advocates or a partnership firm of advocates. In such circumstances and when the term 'business entity' has been understood to include a individual he will not be deprived of quality legal services if his turnover in the preceding financial year is within the limits specified above. Services provided by Arbitral Tribunal or an individual advocate or a firm of advocates by way of support services to any business entity - Reverse charge mechanism - notification is no.30/2012 - Held that:- fter the Arbitration and Conciliation Act 1996 was enacted, the nature of the disputes referred to and to be resolved by arbitration demonstrate that the same has attained the character of “corporate luxury”. The members of the Arbitral Tribunal and those representing parties before the Arbitral Tribunal have started operating in a businesslike manner. It is difficult for individuals to afford the Arbitral services any longer. The hefty fees charged by the Tribunal and the Advocates per day and sometimes per hour make it difficult for litigants including companies to bear the costs of Arbitration. There is no basis for the argument that by the service tax provision section 89 of the Code of Civil Procedure is given a gobye. We are sorry to say this but day after day we receive complaints as to how arbitration is beyond the reach of a common man. Levy is not unconstitutional - Petitions are dismissed.
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