2024 (11) TMI 591 - AT - Service Tax

Service Tax liability under reverse charge mechanism - appellant in their books of account under the head legal and professional expenses booked certain expenditure of legal and professional fees - Revenue has made out a case by picking up a figure of expenditure shown in the books of account assuming that the entire expenditure shown in the books are not legal and professional expanses which is liable to service tax under reverse charge mechanism in the hands of the appellant HELD THAT - We find that to arrive at a final conclusion whether the activity is classifiable under a particular head for which the appellant is liable to pay service tax under reverse charge mechanism has not been verified properly by the adjudicating authority and for that reason for the earlier period this Tribunal 2024 (9) TMI 1652 - CESTAT AHMEDABAD remanded the matter wherein appellant has made out a prima facie case in as much as they have clearly shown the bifurcation of the expenses booked under the head of legal and professional charges in their books of account. Merely because the appellant have booked the expenses of various professional under one head that is legal and professional charges this cannot be the reason to demand Service Tax from the appellant under Reverse Charge Mechanism on the assumption that all the expenses booked under the said head is towards the legal fees. The appellant have produced the chart whereby it is explicit that the major amount pertains to various other professions such as Chartered Accountant, Chartered Engineer etc. for which the appellant is not liable to pay Service Tax under Reverse Charge Mechanism in terms of Section 68(2) read with Notification No. 30/2012-ST. however, this clear bifurcation has not been submitted by the appellant before the adjudicating authority therefore the matter needs to be reconsidered by the adjudicating authority on all the issues. The identical facts involved in the present case and it is coming out from the adjudication process that the adjudicating authority has not verified properly, the books of accounts, ledger and head of expenditure that whether the same is liable to service tax under reverse charge mechanism despite the entire documents were produced by the appellant, therefore, on the same line of the above order, this matter also to be reconsidered by passing a de-novo order.

Summary

Issues:
Interpretation of legal and professional expenses for Service Tax liability under reverse charge mechanism.

Analysis:
The case involved a dispute regarding the classification of expenses under legal and professional fees for the purpose of Service Tax liability under the reverse charge mechanism. The appellant had booked certain expenditures under legal and professional expenses in their books of account. The department contended that since all the expenses were booked under this head, the appellant was liable to pay Service Tax under Section 68(2) of the Finance Act, 1994 read with Notification No. 30/2012-ST dated 20.06.2012.

The appellant argued through their counsel that the department had not properly verified whether all the expenses under the legal and professional fees head were indeed liable to service tax under the reverse charge mechanism. They submitted details of the expenditure to the adjudicating authority, emphasizing that not all expenses were subject to service tax. The counsel pointed out that in a previous period, the Tribunal had remanded a similar matter, indicating a lack of proper verification by the adjudicating authority.

The Revenue representative reiterated the findings of the impugned order, supporting the department's position on the liability of the appellant to pay Service Tax under the reverse charge mechanism for all expenses under legal and professional fees.

Upon careful consideration of the submissions and records, the Tribunal found that the adjudicating authority had not adequately verified whether the activities fell under a category subject to service tax under the reverse charge mechanism. Citing a previous order where a similar issue was remanded, the Tribunal emphasized the need for proper verification. The appellant had presented a chart showing a clear bifurcation of expenses under legal and professional charges, indicating that not all expenses were related to legal fees. However, this detailed bifurcation had not been submitted before the adjudicating authority.

Consequently, the Tribunal set aside the impugned order and allowed the appeal by remanding the matter to the adjudicating authority for a fresh decision. Given the age of the case and the period involved, the adjudicating authority was directed to issue a new order within two months from the date of the Tribunal's order. The Tribunal highlighted the importance of proper verification of expenses to determine the applicability of Service Tax under the reverse charge mechanism. The decision was pronounced in open court on 06.11.2024.