Taxability of Outsourcing Services carried out by a Practicing Chartered Accountant under the provisions of Service Tax

Decision of honorable CESTAT on the question of law and facts

Brief Facts of the Case:

Opening ledger accounts, preparation of monthly bills, preparation of skeleton bills, recording of demand and recoveries, maintenance of daily abstract and tallying, preparation and issue of disconnection lists to field staff and preparation of Union MIS Statements, consolidated DCB statements

The activity was done by an ordinary SSLC passed candidates and not by an aspirant clerical staff who wants to become a Chartered Accountant. This was an additional activity taken up by the Chartered Accountant, which was not connected with professional work of Chartered Accountant's Act 1949.

Contention of the Revenue:

Revenue contended that the activity carried out by the Chartered Accountant were within the definition of Professional Chartered Accountant. Therefore, the services rendered by them and fee collected is required to be brought under the professional Chartered Accountant's Act for levy of Service Tax. The extended period is also applicable and demand should be confirmed for larger period.

Decision:

On the above reading of the extract from the Chartered Accountants Act, it is clear that the activity of outsourcing of meter reading, billing and ledger posting which was an activity to be done by the respective companies does not come within the ambit of the professional activity of Chartered Accountant. It is also seen from the records that the said three companies had outsourced the work to other private parties also who were not Chartered Accountants. Moreover, the fact of the matter is that the employees were not getting trained as Chartered Accountant under the Chartered Accountants Act. They were unskilled personnel without qualifications and were only doing manual work. The employees were covered under the various labour legislations such as Contract Labour (Regulation and Abolition Act, 1970) and Minimum Wages Act.

Services provided by the appellant do not amount to a professional service of accounting provided by a practicing chartered accountant and accordingly did not attract Service Tax liability in terms of Notification No. 59/1998-ST 

(See full text of judgment - 2008 -TMI - 2796 - CESTAT, Bangalore  - in Service Tax Case Laws)