CESTAT Rules Tax under Reverse Charge Mechanism is Not Leviable on Fees Paid for Statutory Audit by Chartered Accountants [Read Order]
The Tribunal held that the charges were not for legal services and service tax could not have been levied under the reverse charge mechanism on statutory audit services provided by a Chartered Accountant.
CESTAT Allahabad - Statutory Audit - taxscan
CESTAT Allahabad - Statutory Audit - taxscan
The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has ruled that fees paid to Chartered Accountants for statutory audit services were not liable to Service Tax under the Reverse Charge Mechanism (RCM) as they were not for legal services and set aside the service tax demand.
Ganpati Mega Builders India Pvt. Ltd. (appellant), a registered provider of "Works Contract Services," faced a dispute following an investigation into their financial records. The Revenue Department, upon scrutinizing the appellant's Balance Sheet and ledgers, observed expenditures under the head "Legal and Professional" charges.
The department treated these expenses as consideration for "Legal Services" provided by a firm of advocates or individual advocates. Therefore, the Department raised a demand for Service Tax under the Reverse Charge Mechanism (RCM) in accordance with Notification No. 30/2012-ST.
The adjudicating authority subsequently confirmed this service tax demand for legal services along with interest and penalties. Aggrieved by the order, the appellant approached the Tribunal.
The Counsel for the appellant contended that the amount paid under the head "Legal professional and consultation" charges was, in fact, towards services provided by a Chartered Accountant for the statutory audit of books of accounts, and not for legal services.
The appellant had produced the relevant ledger before the adjudicating authority to substantiate this claim.
The Bench comprising Sanjiv Srivastava (Technical Member) and Angad Prasad (Judicial Member) noted that the impugned order had confirmed the demand without recording any specific finding regarding the nature of these professional fees.
The Bench found merit in the appellant's submission. The Tribunal held that in respect of services of statutory audit by chartered accountant, service tax could not have been levied under Reverse Charge Mechanism (RCM) on the Appellant.
Consequently, the Tribunal set aside the service tax demand of Rs. 8,625 raised under RCM on these professional fees. The appeal of the appellant was allowed.
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