2016 (4) TMI 398 - HC - Service Tax

Challenge to notifications bearing nos.9/2016, 18/2016 and 19/2016, all dated March 1, 2016 - Seeking amendment in previous notifications of June 30, 2012 pertaining to service tax - Payment of service tax by Senior Advocates on the basis of issue of memorandum of fees - Petitioner complains that though the Finance Bill, 2016 has not yet been passed and proposals are contained in such bill to alter the position pertaining to Senior Advocates, the impugned notifications seek to bring in the changes with effect from April 1, 2016 without affording the Parliament an opportunity to discuss the matters covered by the Finance Bill. Held that - Prima facie, it appears that the changes sought to be brought about may unreasonably prejudice Senior Advocates. The impugned notifications will remain stayed insofar as such notifications pertain to the levy of service tax on Senior Advocates. Leave is granted for the petitioner to sue in a representative capacity. The petitioner will cause the gist of this petition to be advertised within a fortnight from date in two leading English dailies having national circulation. The advertisements will call upon Senior Advocates interested to oppose the cause to apply to be impleaded. Senior Advocates supporting the cause need not apply for being added as parties, unless it is perceived that the petitioner is not diligent in pursuing the same. - Petition disposed of

Summary

Issues:
Challenge to notifications amending service tax rules and Service Tax Rules, 1994 regarding Senior Advocates' payment of service tax without parliamentary discussion.

Analysis:
The petitioner, a Senior Advocate, challenges notifications nos. 9/2016, 18/2016, and 19/2016 dated March 1, 2016, which seek to amend previous notifications related to service tax and the Service Tax Rules, 1994. Specifically, Rule 6 of the Service Tax Rules, 1994, and Rule 3 of the Point of Taxation Rules, 2011, requiring Senior Advocates to pay service tax based on the issue of memorandum of fees are contested. The petitioner refers to a 1974 instruction by the Central Board for Direct Taxes regarding advocates pleading on the Original Side, emphasizing the absence of a contractual relationship between advocates and lay clients for fee payment when engaged by solicitors. The petitioner argues that the proposed changes through the impugned notifications may unfairly impact Senior Advocates, especially without the Finance Bill, 2016 being passed to discuss alterations concerning Senior Advocates' tax liability.

The Court acknowledges the potential prejudice to Senior Advocates due to the changes sought by the impugned notifications. Affidavits are requested from both parties, with the affidavit-in-opposition to be filed within four weeks and a reply within a fortnight thereafter. The petition is scheduled for a hearing on the first Monday following these filings. The Court stays the enforcement of notifications nos. 9/2016, 18/2016, and 19/2016 concerning the levy of service tax on Senior Advocates. Additionally, the petitioner is granted leave to sue in a representative capacity, and is directed to advertise the petition's essence in two national English dailies within two weeks, inviting interested Senior Advocates to oppose or support the cause. Urgent certified copies of the order will be provided to the parties upon request, subject to necessary formalities.