2007 (9) TMI 94 - AT - Service Tax

Outsourcing Services carried out by Practicing Chartered Accountant - same services being outsourced to non CA Firms by the company - can not be said that these services are being provided under professional capacity - Not liable to be tax under Chartered Accountant s Services

Summary

Issues Involved:
- Classification of services provided by Chartered Accountants.
- Applicability of Service Tax under Notification No. 59/1998-ST.
- Alternative classification under Business Support Services or Business Auxiliary Services.

Detailed Analysis:

Classification of Services Provided by Chartered Accountants
The primary issue is whether the activities carried out by Chartered Accountants, such as opening ledger accounts, preparation of monthly bills, and maintenance of daily abstracts, fall within the ambit of professional activities of a practicing Chartered Accountant or under another classification. The activities in question came into existence in 2006 under the category of 'Support Services of Business or Commerce.'

The Commissioner (A) concluded that the services rendered were not part of the professional activities defined under the Chartered Accountant's Act, 1949. The contract was for outsourcing operations of ledger maintenance related to billing activities, not for professional accounting services. The relationship between the appellant and the contracting agencies was more akin to that of an agent and principal rather than a practicing Chartered Accountant and client.

Applicability of Service Tax under Notification No. 59/1998-ST
The adjudicating authority had confirmed the demand for Service Tax on the grounds that these were taxable services of accounting provided by a practicing Chartered Accountant. However, the appellant contended that the services provided were limited to maintaining ledger accounts for billing purposes, which did not amount to professional accounting services.

The Commissioner (A) observed that the work could be allotted to non-Chartered Accountants and involved semi-skilled workers. The contract included provisions for penalties and security deposits, further indicating it was not for professional accounting services. The Commissioner (A) concluded that the services did not fit the description of taxable services under Section 65 [105] [s] and were not liable for Service Tax under Notification No. 59/1998-ST.

Alternative Classification under Business Support Services or Business Auxiliary Services
The appellant claimed that the services could be alternatively classified under Business Support Services, which came into existence in 2006. The Commissioner (A) noted that there was no evidence of the appellant having filed any declaration or discharged any liability under this classification for the relevant period (1999-2001). The classification under Business Support Services was not applicable as it was introduced only in 2006, and the services rendered during 1999-2001 could not be classified under this category.

The Commissioner (A) also noted that ledger maintenance and billing work did not amount to professional accounting services by a practicing Chartered Accountant. The work was confined to specific transactions and did not involve the comprehensive accounting processes necessary for drawing a balance sheet.

Conclusion
The Tribunal upheld the findings of the Commissioner (A) that the services provided by the Chartered Accountant did not amount to professional accounting services and were not liable for Service Tax under Notification No. 59/1998-ST. The alternative classification under Business Support Services was not applicable for the period in question. The Revenue's appeals were rejected, and the party's appeal was allowed.

Pronounced and dictated in open Court.