2008 (1) TMI 104 - AT - Service Tax

Chartered Accountants - activity of outsourcing of meter reading billing and maintaining ledger account on behalf of the client - Chartered Accountants took these activities as special activity and- they employed non-professional persons and not aspirant articled staff who wants to become a Chartered Accountants Impugned service does not come within the definition of Chartered Accountants services

Summary

Issues Involved:
1. Classification of services provided by Chartered Accountants under the category of "Practicing Chartered Accountant" or "Business Auxiliary Service."
2. Applicability of Service Tax on the services rendered by Chartered Accountants in the context of ledger maintenance and billing activities.
3. Interpretation of the scope of professional services under the Chartered Accountants Act, 1949.
4. Validity of the Commissioner (Appeals)'s decision to exempt the service from Service Tax.

Detailed Analysis:

1. Classification of Services:
The primary issue revolves around whether the services provided by the Chartered Accountants, which involved sending clerks for recording electricity meter readings and maintaining ledgers for billing activities, fall under the category of "Practicing Chartered Accountant" or "Business Auxiliary Service." The Revenue argued that these services were professional services rendered by Chartered Accountants, thus attracting Service Tax under the category of "Practicing Chartered Accountant." However, the Commissioner (Appeals) concluded that these activities did not constitute professional services of accounting but were more clerical in nature, hence not attracting Service Tax under "Practicing Chartered Accountant."

2. Applicability of Service Tax:
The Original authority had confirmed the demand for Service Tax along with interest and penalties, considering the activities as taxable under "Practicing Chartered Accountant." The Commissioner (Appeals), however, noted that the ledger maintenance work was confined to specific transactions related to billing and recoveries, which did not amount to comprehensive accounting services requiring professional expertise. Consequently, the Commissioner (Appeals) exempted these services from Service Tax, classifying them under "Business Auxiliary Service" instead.

3. Interpretation of Professional Services:
The judgment delves into the definition of professional services under the Chartered Accountants Act, 1949. The Act outlines that professional services include auditing, verification of financial transactions, preparation of financial statements, and management consultancy services. The Commissioner (Appeals) observed that ledger maintenance and billing activities did not encompass these professional services. The Tribunal upheld this interpretation, emphasizing that the activities in question were clerical and did not involve the professional expertise of Chartered Accountants as defined by the Act.

4. Validity of Commissioner (Appeals)'s Decision:
The Tribunal supported the Commissioner (Appeals)'s decision to exempt the services from Service Tax under the classification of "Practicing Chartered Accountant." The Tribunal referenced its previous judgment in the case of M/s. Jaded Siddappa & Co. and others, which had similarly concluded that outsourcing activities like meter reading, billing, and ledger maintenance did not fall under the professional activities of Chartered Accountants. The Tribunal also noted that the employees performing these tasks were non-professional and covered under various labor legislations, further reinforcing that these services did not attract Service Tax under the professional category.

Conclusion:
The Tribunal dismissed the Revenue's appeals, upholding the Commissioner (Appeals)'s decision that the services provided by the Chartered Accountants in this context were not professional services of accounting. The Tribunal emphasized that these activities were clerical and did not require the professional expertise of Chartered Accountants, thus not attracting Service Tax under the category of "Practicing Chartered Accountant." The Tribunal also rejected the Revenue's request to refer the matter to a Larger Bench, as there were no contradictory judgments necessitating such a referral.