Service Tax Leviable on Legal and Professional Charges under BAS: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that service tax is leviable on Legal and Professional Charges under Business Auxiliary Services (BAS).

The appellant, M/s Infinity Credit Consultants is engaged in providing taxable services under the category of Business Auxiliary Services to M/s ICICI Bank. While scrutinizing the documents of the appellant, Department observed that they have received total amount of Rs. 1,02,12,656/- for the year 2006-2007 to 2010-2011 as commission received from M/s ICICI Bank holding that the commission was against providing the Business Auxiliary Services, to the bank, the service tax of Rs. 16,19,972/- was observed to not have been paid by the appellants.

The Department observed that appellants have received some income as legal and professional charges respectively for the aforesaid period, however, the tax liability thereupon has not been discharged. The department while forming the opinion that the said activity of providing legal and professional consultancy is nothing but a Business Support Services for the banks/financial institutes, the service tax liability was questioned.

The counsel for the appellant has submitted that the appellant has been vigilant about his tax liabilities, hence, was regularly and diligently discharging his tax liability on commission as used to be received from the banks while referring customers desirous of seeking loan, to the banks.

It was further submitted that the appellant was also a consultant to the banks/financial institutions and thus was rendering the services of drafting and preparing legal reports about the viabilities of the loans and property titles on which loan is sought. Hence, it was purely the Legal Consultancy Service as contrary to Business Support Service as alleged by the Department.

A Two-Member Bench of the Tribunal comprising Dr Rachna Gupta, Judicial Member and Hemambika R Priya, Technical Member observed that “ We observe that though appellants were drafting and preparing legal reports but only for banks/financial institutions that too for ensuring the viability of loan and for verifying the property title documents for which such verification was sought by such banks. We opine that such activity is nothing beyond a due diligence of financial records of the customers of these banks/ financial institutions. Thus it cannot a service provided as assistance in any branch of law.”

“It actually becomes the service provided to a business entity/a financial institute/bank, to support the business or commerce of the said bank. These observations are sufficient for us to hold that the services, in question, have rightly been held to be the Business Support Service which is a taxable service” the Bench noted

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