The Hyderabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), has held that the certification services rendered by the Chartered Accountant is not subject to Service Tax till 28th February 2006.
A division bench of the Tribunal was hearing an appeal by the audit firm, Pricewaterhouse wherein the appellant had issued a certificate to Satyam Computers Limited for Satyam’s listing of shares on New York Stock Exchange and the said certificate was to be tendered by Satyam to Securities Exchange Commission, USA. The said certificate mentions about checking of various aspects and reporting as per the norms laid down by Securities Exchange Commission.
The department held that the said service is included under head ‘accounting and auditing’ and hence, taxable in terms of Section 65(83) read with Section 65(105)(s).
The appellant contended that the said service is not so covered under that head and is fully exempted under notification No. 59/98-ST, dated 16.10.1998 as amended.
In the Notification No. 59/98, except for 11 services covered by the said notification, all other services rendered by a Chartered Accountant are exempt from service tax. The said notification was in force till 28.02.2006 before being rescinded vide notification No. 2/2006-ST, dated 01.03.2006.
After analyzing the Notification deeply, the Tribunal noted that the appellant had checked the books of accounts and thereafter had issued the required certificate.
“In our opinion, the word ‘accounting’ implies pure accounting i.e. maintaining and writing of books of accounts etc. and there is no dispute that the appellant was not maintaining or writing any books of accounts for Satyam Computers Limited as they could not have since they were the statutory auditors of Satyam and statutory auditor cannot undertake to write and maintain books of accounts of its clients. Now, coming to the word “audit” it implies thorough checking of books of accounts, vouchers and legal and other supporting documents with a view to verify the authenticity or otherwise of the particular transaction.”
The Tribunal further noted that auditing is a statutory function in terms of Companies Act, 1956 and the report of the Auditor clearly mentions that ‘they have audited the attached balance sheet and the P&L account of the Company”. As compared to the above, the certificate issued in the present case is not even remotely concerned with auditing. It just states that the Chartered Accountant has verified/checked the books of accounts and thereafter has issued the certificate as per the norms laid down by Securities Exchange Commission.
“Thus, it was purely a certification work and nothing to do whatsoever with auditing. As can be seen, the certification service by a Chartered Accountant was not included in the 11 services enlisted in Notification No. 59/98 (supra) which were taxable. And hence, the certification service being not included in the 11 services so mentioned was clearly exempt in terms of the said notification till 28.02.2006. In view of the foregoing, we hold that the tax demand on this point is unsustainable and liable to be set aside and we do so,” the Tribunal said.
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