2011 (4) TMI 491 - HC - Service Tax

Classification - whether the assessees offered their services in their professional capacity of practicing chartered accountants and if the services offered amounted to professional services of accounting liable to attract service tax in terms of Notification No. 59/1998-S.T. - The said question falls squarely within the exception carved out in Section 35G, an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment , and the High Court has no jurisdiction to adjudicate the said issue - Appeals are rejected

Summary

Issues:
1. Challenge to the order of the Appellate Tribunal regarding service tax liability of chartered accountants.
2. Determination of whether the services provided by chartered accountants fall within the definition of taxable service for service tax purposes.
3. Classification of the impugned activity under the category of chartered accountant or business auxiliary services.
4. Jurisdiction of the High Court to adjudicate on the question of rate of duty and classification.

Analysis:

1. The appeals before the High Court involved a challenge by the revenue against the order of the Appellate Tribunal, which held that the services provided by chartered accountants did not fall within the definition of taxable service under Section 2(2) of the Chartered Accountants Act. The lower authorities determined that the relationship between the chartered accountants and the client was that of an agent and principal, not that of practicing chartered accountants. The services provided were for ledger maintenance and billing, not for specialized professional accounting skills. The Tribunal upheld the lower authorities' decision, stating that outsourcing activities like meter reading and ledger posting did not constitute professional activities of chartered accountants, as the work was outsourced to unskilled personnel without qualifications.

2. The main question for consideration in the appeals was whether the impugned activity constituted a service liable to service tax and if it fell under the category of chartered accountant or business auxiliary services. The Tribunal's decision was based on an analysis of the Chartered Accountants Act, 1949, and the nature of the outsourced work, which led to the conclusion that the activity did not qualify as a professional service of accounting attracting service tax liability under Notification No. 59/1998-S.T.

3. The High Court highlighted that the issue of classification and rate of duty fell within the exception specified in Section 35G, which stated that such matters were beyond the jurisdiction of the High Court. Citing precedent, the High Court declared that the appeals were not maintainable in the High Court and that the exclusive jurisdiction to decide on such questions lay with the Apex Court under Section 35L. Therefore, the appeals were rejected, with the Revenue granted the liberty to approach the Apex Court for further proceedings.

4. As a result of the High Court's decision, the registry was directed to return the certified copies of the orders to the Department for further action, emphasizing the limited jurisdiction of the High Court in matters related to the rate of duty and classification, which are under the exclusive purview of the Apex Court.