Supreme Court stays levy of Service Tax on Lawyers

A Supreme Court bench comprising Chief Justice H.L. Dattu, Justice A.K. Mishra and Justice Amitava Roy has stayed the Bombay High Court’s dismissal of a challenge to the levy of service tax on lawyers.The Court also stayed the Bombay High Court order dated December 15, 2014. The matter has been tagged with other petitions pending before the Supreme Court.Sub-clause (zzzzm) of clause (105) to Section 65 of the Finance Act, 1994, which was inserted by the Finance Act, 2011, was challenged by various Bar Associations and lawyers in different High Courts of the country. This section sought to levy service tax on fees paid by clients to the lawyers.Delhi High Court had earlier stayed the operation of the impugned section. However, Bombay High Court had dismissed the petitions in December, 2014. After going through the contentions from both sides, the judgment noted, “the taxable service means any service provided or to be provided to any person, by a business entity, in relation to advice, consultancy and assistance in any branch of law, in any manner.” You may read the LiveLaw story and judgment here.The Supreme Court was now hearing an appeal filed by the Bombay Bar Association. Another petitioner before the Bombay High Court, P.C. Joshi had challenged the Bombay High Court order and the Supreme Court had issued notice in that case.The Bombay Bar Association has challenged the provision, raising the question of relationship between an advocate and a litigant. It has asked whether it is that of a service provider and a service recipient or whether that of a representative and a litigant.It further questions the “hasty manner” in which the Bombay High Court proceeded to decide the issue, since levy was in the nature of a Federal Tax and hence, the incidence of taxation cannot vary in different jurisdictions.The Petition also questions whether the term business entity used in sub-clause (1) of clause (zzzm) can be said to include within its fold any firm or association that provides legal services of any nature, “considering the legal profession was always an honorable profession which is the antithesis of business”.“Whether the impugned judgment is correct and legal in as much as levy of service tax on the provision of assistance to the court would hit the provision of justice either by the individual or a business entity as both are indisputably guaranteed under right to justice in terms of Article 21 read with Article 39A of the Constitution,” it asks.

Supreme Court stays levy of Service Tax on Lawyers

Apoorva Mandhani

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