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 any tax burden under the reverse charge framework with nil liability on the service provider. On that basis, the service tax demand against the advocate could not be sustained, as the order-in-original was contrary to binding notifications and passed without jurisdiction. The Bombay HC also treated the recovery notice as consequential to the unsustainable demand. The levy, the impugned order, and the recovery notice were quashed.

---

---

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.

---