In a recent ruling, the Karnataka High Court set aside a demand order related to service tax issued against an advocate providing legal services, reaffirming the exemption applicable to individual advocates. The matter was remitted for reconsideration.
The petitioner, a practising advocate, challenged the impugned order dated September 27, 2023, issued by the Assistant Commissioner of Central Tax, arguing that it imposed service tax despite statutory exemptions. Citing the Finance Act, 1994, the petitioner contended that their legal services were not taxable under Sections 65B(44) and 65B(51), and the imposition of service tax under Section 66B was without legal basis and contrary to established exemptions.
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The petitioner supported their claim by referencing the Bombay High Court judgment in Advocate Pooja Patil v. The Deputy Commissioner (WP No. 1085/2024, dated January 24, 2024). This precedent stated the Notifications No. 25/2012 and No. 30/2012, which categorically exempt individual advocates from service tax on legal services.
The petitioner argued that the respondent’s failure to consider these binding notifications rendered the order legally unsustainable. Furthermore, it was noted that the respondent did not fully account for the material submissions and legal precedents, indicating a lack of due consideration.
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The respondent’s counsel contested the petition, asserting its lack of merit and seeking dismissal. They also claimed that the petitioner was afforded reasonable opportunity to respond to notices, an assertion the petitioner refuted due to an alleged procedural lapse in consideration of their submissions.
Justice S. R. Krishna Kumar found that the petitioner’s submissions, including the Bombay High Court’s ruling, were indeed overlooked by the respondent. It stated that “A perusal of the material will indicate that apart from the fact that the petitioner had not submitted his reply/response to the notices issued by the respondent, the aforesaid contentions of the petitioner and the judgment of the Bombay High Court in Pooja Patil’s case supra have undisputedly not been considered by the respondent.”
Consequently, the Court set aside the impugned order and remitted the matter for reconsideration, allowing the petitioner to present further documentation for due review.
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