When service tax can be levied on advocates?

The present writ petition was filed challenging levy of Service Tax on Advocates. Section 65(105)(zzzzm) of the Finance Act, 1994 as inserted by the Finance Act 2009 and substituted by Finance Act 2011, proceeds to levy Service Tax on the Advocates. The amendment to Finance Act as mentioned levies, assesses and recovers Service Tax from Advocates and hence the same was challenged for being violative of the constitutional guarantee of justice to all. It was submitted that the Advocates are engaged not only for aid and advice but also for appearance and representation of a case in Court. It is not possible for litigants to argue their cases before the Court of law because they may involve complicated factual and legal issues. In such circumstances, when administration of justice is a sovereign and regal function of the State and Advocates are part of the same, then, they cannot be said to be rendering any service and of the nature envisaged by the Service Tax Act/Finance Act. It was further submitted that the levy of Service Tax imposes a heavy additional burden on litigants and also disables them from approaching the Court.
As per Section 65(105)(zzzzm), the taxable service would mean any service provided or to be provided to any person, by a business entity, in relation to advice, consultancy or assistance in any branch of law, in any manner. The other part of this definition is in relation to representational services before any Court, Tribunal or Authority and to any business entity by an Arbitral Tribunal in respect of arbitration. The explanation defines the expressions 'arbitration' and 'arbitral Tribunal'.

The High Court turned down the contentions raised holding 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. It is so 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. He should not be burdened with a tax to be levied on the advocate for providing such services. Therefore, if the legislature thought it fit to exclude a individual advocate and rendering the above services to individuals, so long as he is rendering services to those who cannot afford to pay heavy professional fees and charges being individuals that the legislature deemed it fit not to include in the tax bracket the individual advocates. These advocates may be rendering services to the needy and specially women and children at Village, Taluka, District, Town and even at city levels. It was therefore held to be apparent that the legislature while making the above distinction did not in any manner overlook the constitutional guarantee and as envisaged in the preamble to the Constitution of India.

The Court as reiterated the law as settled that while dealing with constitutional validity of a taxation law enacted by Parliament or State Legislature, the Court must have regard to the following principles:

(i) there is always presumption in favour of constitutionality of a law made by Parliament or a State Legislature;
(ii) no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found;
(iii) the Court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence;
(iv) hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law; and
(v) in the field of taxation, the Legislature enjoys greater latitude for classification.
The above principle held to be as fully governing the inquiry and controversy involved in the present matter.

No substance held to be present in the complaint that the profession of advocates and legal profession has been treated on par with commercial or trading activities or dealings in goods and other services. Merely because of the role of the advocate, it does not mean that his position as an officer of the Court and part and parcel of administration of justice is in any way undermined or interfered with. The Advocates and legal practitioners are known to pay professional taxes and taxes on their income. They are also brought within the purview of service tax because their activities in legal field are expanding in the age of globalization, liberalization and privatization. They are not only catering to individuals but business entities. If it is found that the advocates are catering to affluent and rich class of litigants and recipients of legal services, then, the tax on the services rendered to them is definitely within the permissive sphere of legislation. The classification between services provided to business entities and individuals not illusory but has a definite nexus and with the object sought to be achieved and therefore there is no violation of the constitutional mandate. The classification is not arbitrary, discriminatory, unfair, unreasonable and unjust.
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Bombay High Court

IN THE HIGH COURT OF JUDICATURE AT BOMBAY

 ORDINARY ORIGINAL CIVIL  JURISDICTION

 WRIT PETITION NO.1927 OF 2011
P C joshi v union of India
Dated;15.12.2014

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