2026 (3) TMI 1641 - HC - Service Tax

Service tax on legal services found unsustainable where notifications exempted the advocate's supply and placed liability under reverse charge.

Legal services supplied by an individual advocate to a partnership firm of advocates were covered by notifications that exempted such services and placed ... Service tax exemption on legal services - Jurisdiction in disregard of binding exemption notificationsLegal services by advocate to partnership firm of advocates - Binding exemption notifications - Lack of jurisdiction - Service tax could not be levied on the petitioner, an advocate, in respect of legal services rendered to a partnership firm of advocates, and the adjudicating authority lacked jurisdiction to proceed contrary to the governing notifications. - HELD THAT: - The Court held that the controversy stood covered by its earlier decision in Advocate Pooja Patil, which had construed Notification Nos. 25/2012-ST and 30/2012-ST to mean that legal services provided by an individual advocate to an advocate or partnership firm of advocates were either exempt or not exigible in the hands of the advocate, the liability, where applicable, being structured under the reverse charge mechanism. Since the impugned proceedings proceeded against the individual advocate despite the binding notifications, the authority had acted without jurisdiction. The Court also found the petitioner's reliance on Manisha Rajiv Shroff 2026 (2) TMI 532-Bombay High Court to be well founded and treated the present case as requiring the same result. [Paras 8, 9, 10, 11]The order-in-original and consequential recovery action were liable to be quashed, and the petition was allowed.Final Conclusion: Following its earlier decisions and the applicable notifications, the Court held that service tax was not leviable on the petitioner for the legal services in question and that the proceedings against him were without jurisdiction. The petition was accordingly allowed and the impugned adjudication and recovery consequences were set aside. Issues: Whether service tax could be levied on legal services provided by an individual advocate to a partnership firm of advocates, and whether the consequential order-in-original and recovery notice were liable to be quashed.Analysis: The relevant notifications governing service tax on legal services exempted the service provided by an individual advocate or a partnership firm of advocates by way of legal services, and also placed the taxable burden under the reverse charge framework with nil liability on the service provider. In the light of those notifications, the demand raised against the petitioner, who was an advocate, could not be sustained. The impugned order was therefore contrary to the binding statutory notifications and was passed without jurisdiction. The Court also followed its earlier view on the same legal position and found the subsequent recovery action to be consequential to an unsustainable demand.Conclusion: The levy was held unsustainable, and the impugned order and recovery notice were quashed. Relief was granted in favour of the petitioner.