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TMI Blog2014 (12) TMI 595X X X X Extracts X X X X X X X X Extracts X X X X ..... quires legal advice, aid and assistance, then, that should be available to him at times immediately and cheaply. What holds good for chartered accountants and architects must equally apply to other professionals such as advocates, and who too are well conscious of their status. The manner in which the services of lawyers and advocates are rendered has been a subject matter of a decision in the case of disciplinary action initiated by Bar Council of Maharashtra against a professional. The classification between service provided to business entities and individuals cannot be said to be illusory. The classification has a definite nexus and with the object sought to be achieved. If that is to explore and expand the sources of revenue and by widening the tax net, then, it is achieved by bringing within the fold the aforementioned services. There is, therefore, no violation of the constitutional mandate. The classification cannot be termed as arbitrary, discriminatory, unfair, unreasonable and unjust. Incidentally, we may observe that no material has been placed before us by the Petitioners which would indicate that for a brief period from the time the impact of levy of service ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nner. It is difficult for individuals to afford the Arbitral services any longer. The hefty fees charged by the Tribunal and the Advocates per day and sometimes per hour make it difficult for litigants including companies to bear the costs of Arbitration. There is no basis for the argument that by the service tax provision section 89 of the Code of Civil Procedure is given a gobye. We are sorry to say this but day after day we receive complaints as to how arbitration is beyond the reach of a common man. Levy is not unconstitutional - Petitions are dismissed. - Writ Petition No. 1927 of 2011, Writ Petition (L) No. 1764 of 2011, Writ Petition (L) No. 1808 of 2011 - - - Dated:- 15-12-2014 - S. C. Dharmadhikari And A. A. Sayed,JJ. For the Petitioner : Mr. Sushant Murthy i/b. N. S. Thacker , Mr. Rajiv Patil, Senior Counsel, with Mr. Amol Mhatre For the Respondent : Mr. S. S.Pakale with Ms. Suchitra Kamble, Mr. Parag Vyas JUDGMENT (Per S. C. Dharmadhikari, J.) Rule. Respondents waives service. By consent, Rule made returnable forthwith. 2] By this Writ Petition under Article 226 of the Constitution of India, the Petitioner, a practicing advocate prays ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Finance Act 2009 and substituted by Finance Act 2011, proceeds to levy Service Tax on the Advocates. The understanding of the Petitioner and the association of advocates supporting him is that the amendment to Finance Act as referred above levies, assesses and recovers Service Tax from Advocates and that would be violative of the constitutional guarantee of justice to all. It is theirp submission that justice cannot be secured unless a cause or a legal proceeding is represented properly and effectively before a Court. It is the duty of the Advocates to represent the cause of the litigant before the Court of law to the best of their ability. It is submitted that the Advocates are engaged not only for aid and advice but also for appearance and representation of a case in Court. It is not possible for litigants to argue their cases before the Court of law because they may involve complicated factual and legal issues. In such circumstances, when administration of justice is a sovereign and regal function of the State and Advocates are part of the same, then, they cannot be said to be rendering any service and of the nature envisaged by the Service Tax Act/Finance Act. Legal p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... view of the above, it is manifestly clear that the Advocates are officers of the Court, and they have a duty of assisting the Courts in a just and proper manner in the just and proper administration of justice. Thus, considering representation provided by an Advocate as a commercial service is highly unreasonable, absurd and arbitrary, merely because the Advocates receive consideration from clients. It is the duty of the State not to deny to any person equality before the law or the equal protection of the laws within the territory of India. While the impugned amendment automatically creeps in inequality, as for instance in a case, Petitioner may be an individual/State and the respondent a business entity and the business entity to defend its rights and get protection of law will be required to pay Service Tax and not the individual/State even though the Petition may be frivolous and litigation may have been forced on the business entity. Similarly, the Advocate representing the business entity will have to bear the incidence of tax. 9] It is submitted that the said amendment also violates Article 268A of the Constitution and contravenes section 66 of the Finance Act, 1994, whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tigating parties and amounts to a levy of Court Fees which is beyond the powers of the Central Government under List 1. 12] The levy of Service Tax on advisory, consultancy and assistance services to the extent it relates to levy of Service Tax on legal advice by Advocates is invalid as a Lawyer is merely advising or opining on the position of law and is only assisting the State in making the public aware about what the law on a particular subject is and, therefore, is only rendering a service to the State. The levy of Service Tax on legal services goes against the principle of Article 39A of the Constitution of India which amongst other things states that the State has to secure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities. Levy of Service Tax would be a disability which would restrict the opportunity of securing justice as the same makes legal services that much costlier economically. Even the Ministry of Law and Justice in Rajiv Gandhi Adhivakta Prashikshan Yojana of the Government of India have stated that: Constitution of India reflects the quest and aspiration of the mankind for justice. Its preamble spea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4A for Advocates, the requirement of issuing such invoices within 14 days of completion of services, the provisions of section 77 of the Finance Act 1994 and the provisions of section 89 of the Finance Act 1994 as inserted by the Finance Act 2011 to the extent they require Advocates to issue invoices at all, to issue invoices within 14 days of the completion of assistance, relating to levy of penalty under section 77 of the Finance Act 1994 for not issuing of invoices and prosecution provisions under section 89 of the Finance Act 1994 to the extent they relate to requirement of issuing invoice within 14 days of completion of rendering of service are ultra vires the Finance Act 1994 and Article 19(1) (g) of the Constitution of India. 15] It is submitted that without prejudice even if it is held that service tax is leviable on lawyers the provisions of Rule 4A of the Service Tax Rules 1994 requiring invoices to be issued within 14 days of completion of the rendering of legal assistance, levy of penalty under section 77 of the Finance Act 1994 and prosecution provisions under section 89 of the Finance Act 1994 to the extent they relate to issue of invoice within 14 days of completi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys discriminatory. If there is a rational nexus on the basis of which differentiation has been made with the object sought to be achieved by particular provision, then, such differentiation is not discriminatory and does not violate the principles of Article 14 of the Constitution. This principle is well settled. In the present case there is intelligible basis for differentiation. Whether the same result or better result could have been achieved and better basis of differentiation evolved is within the domain of legislatures and must be left to the wisdom of the legislature. Moreover, there is a greater latitude in classification that is allowed in matters of taxation. It is well settled that in matters of taxation, Courts permit greater latitude to pick and choose objects and rates for Taxation and Parliament/Legislature has a wide discretion with regard thereto. The State is allowed to pick and choose objects, persons, methods and even rates for taxation. Hence I state that the Legislature or the Parliament is competent to identify and reasonably differentiate between various services and service recipients for the purpose of taxation and that there is no ground to challenge t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Further, individuals seeking the representational services of lawyers/advocates are not required to pay any service tax to the lawyers. With reference to paras 7 and 8 of the Writ Petition, I reiterate that the legislative competence of the Parliament to levy service tax under Entry 97 has been upheld by the Hon'ble Supreme Court in a number of judgments. Since the business entity uses the services of advocates for representation, service tax is leviable. Further, I say that 'value addition' does not necessarily mean that certain intrinsic changes must occur, in what is being offered as goods or services. In the case of services provided by the advocates, it is their skill, knowledge and expertise in legal matters which is availed of by the clients for monetary consideration on which service tax has been sought to be levied. With reference to paras 9, 10 and 11 of the Writ Petition, the Respondent states that no fundamental right of any persons has been violated. Equality before law and equal protection of laws and freedom to practice any profession is still provided. The imposition of Service Tax on lawyers does not take away or abridge the rights conferred by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties to render the service of adjudicating their disputes, and is hence correctly exigible to service tax. However, vide Notification No.45/2011 Service Tax, dated 12/09/2011, services in respect of arbitration by an Arbitrator Tribunal are exempt from levy of service tax (annexed is a copy of notification marked as 'A'). Further, I reiterate that not only lawyers but also other professionals like chartered accountants, cost and work accountants and company secretaries provide representational services before the statutory authorities like Tribunals etc. They were earlier exempted from paying service tax on representational services vide notification No.25/2006ST, dated 13.7.2006 (now rescinded vide notification No.32/2011ST, dated 25.4.2011). Lawyers/Advocates provide assistance in administering justice by putting forth the facts of the case in a true manner; so do other professionals representing their clients before the authorities. To say that they do not render any service to the clients is not correct. They are duly compensated in the form of fee which is charged from the clients. Accountability to courts for their actions is no doubt an important aspect of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the purpose of Legislation. With reference to paras 27 and 28 of the Writ Petition, the Respondent states that Parliament has legislative competence to levy service tax under Entry 97 of List 1. The submission that the Constitutional 88th Amendment Act has not yet been brought into force are untenable in the eyes of law. I say that this point is not longer res integra. With reference to para 29 and 31 of the Writ Petition, the respondent states that Rule 4A of Service Tax Rules 1994 applies to all taxable service providers and not merely legal service. It is submitted that this rule is in operation since 10/09/2004 and is suitably amended from time to time within the service tax frame work. The invoice is the basis of availment of cenvat credit under Cenvat Credit Rules 2004. It enables the service recipient to obtain cenvat credit of service tax paid/payable on the taxable service availed. This prevents the cascading effect. Thus, it is one of the key documents on the basis of which the service tax is administered. Further there is a need to prescribe a time limit for compliance with any provision regarding issuance of invoice. Any dispensation of the same would affect the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contravene section 66 of the Finance Act, 1994. No discrimination has been made. This has been a conscious attempt to exclude representational services provided to individuals. The intention is to cover those where the new levy can be imposed and it can be collected without much hardship to tax payers. 9. I say that this issue has already been examined by the Hon'ble Apex Court in favour of this Respondent. It is further submitted that the impugned notification does not impose any restrictions on the legal profession nor it altered, mofidied or amended the provisions of the Advocates Act 1961 or any other relevant statute to their disadvantage. It is well settled principle of law that in matters of taxation laws, the Court permits greater latitude to pick and chose objects and rates for taxation and has a wide discretion with regard thereto. I further say that right to justice is available to all. The amendment does not seek to place any restriction on the same. Further, individuals seeking the representational services of lawyers/advocates are not required to pay any service tax to the lawyers. 10. I further say and submit that no fundamental right of any person has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of advocates by way of support services to any business entity located in the taxable territory would be taxable. Now, the service tax and of the description given in the table will be liable to tax in the hands of the recipient and to the extent of 100%. Meaning thereby, in respect of services provided or agreed to be provided by an Arbitral Tribunal, Service Tax to the extent of 100% by the recipient of the service and in respect of services provided or agreed to be provided by individual advocate or firm of advocates by way of legal services would be liable to Service Tax and the recipient accordingly will have to bear it in its entirety. 21] Mr. Thacker, therefore, submits that first of all no Service Tax is liable to be paid on legal services or services rendered by an advocate, individually or collectively. Assuming that Service Tax is leviable and recoverable, yet, the burden to collect and pay the same should not be on the service provider and the amendment made by the above Notification should be given retrospective effect. Mr. Thacker submits that the Petitioner wants to assert that no Service Tax is liable to be levied, assessed and recovered from an advocate or the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al in respect of arbitration. 22] It is submitted that the budget speech of the then Finance Minister while presenting the union budget of 2011-12 indicates as to how the State wishes to expand the scope of legal services to include services provided by business entities to individuals as well as representational and arbitration services by individuals to business entities. If in the light of this budget speech, the notification of 20th June, 2012 is perused, then, according to Mr. Thacker the constitutional guarantee of equal justice and equal opportunity to secure justice, guaranteed by Article 21 and 39A of the Constitution of India is defeated. The duty of the State is to render and promote justice. Any hindrance or obstacle in the promotion of justice would be defeating the constitutional guarantee. He submits that the State has to guarantee equal opportunity so as to remove economic, social and other disabilities. No disability or obstacle can be placed in the path of access to justice. If an advocate is a means to secure justice, then, by limiting the advocates' capacity the state is indirectly acting contrary to the constitutional mandate. An impartial and independen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ested parties that individual advocates rendering service to individuals would suffer immensely is redressed. The levy of service tax would affect them adversely and consequently the constitutional mandate of free and fair opportunity to secure and guarantee justice. Therefore, that hardship has been removed. Mr. Pakale has laid special emphasis on the fact that prior to the amendments made in 2011 service provider and recipient both were included. However, after the amendments made in the relevant Notification having been brought into effect, the provider has been relieved and the burden falls on the recipient. In such circumstances, the Notifications have to be read accordingly. Mr. Pakale submits that by Notification No.12/2012 dated 17th March, 2012 and particularly clause (6) services provided to any person other than a business entity by an individual as an advocate or a person represented on and as Arbitral Tribunals came to be exempted from the service tax. Thus, the service provided by an individual advocate to any person other than a business entity came to be exempted. The term Arbitral Tribunal is defined. By Notification No.15/2012 dated 17th March, 2012 services pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regard, Mr. Pakale relies upon a prescription to obtain a license or permit to carry on business. Therefore, it is futile to complain that the restrictions which are guaranteeing economic stability for the country will in any way hamper the exercise of the right. Mr. Pakale points out that a restriction in public interest cannot be said to be unreasonable merely because in a given case it operates harshly on a person or some persons. It is submitted that there is nothing unreasonable, unfair, illegal or discriminatory in the imposition and levy of service tax. There is a policy to tax and in larger public interest that would override the business interest of an individual. Mr. Pakale brings to our notice several aspects and which could be said to be part and parcel of a reasonable restriction. Relying upon a judgment of the Hon'ble Supreme Court in the case of M.A. Rehman V/s. State of Andhra Pradesh reported in AIR 1961 SC 1471, Mr. Pakale submits that the restriction to pay tax cannot be said to be unreasonable. It is in these circumstances that the challenge must fail. Mr. Pakale also relies upon the judgment of the Hon'ble Supreme Court in the case of M/s. K. M. Mohamad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce or the imposition of Service Tax defeating the guarantee of equal justice, then, all the more, this Writ Petition must fail. 31] Mr. Pakale has relied upon the provisions in the Finance Act insofar as the levy of service tax on advocates and legal practitioners. He also relies upon the Constitution Bench judgment of the Hon'ble Supreme Court of India in the case of Federation of Hotel and Restaurant V/s. Union of India and others reported in AIR 1990 SC 1637. 32] For properly appreciating the rival contentions, we would firstly refer to the provision in the Finance Act enabling the levy of Service Tax on advocates and the amendments made thereto. 33] Admittedly, there is no separate legislation styled as Service Tax Act. Section 64 to 98 inserted in Chapter V and VA of the Finance Act, 1994 provide for Service Tax. Section 64 subsection (1) indicates that the Chapter applies to the whole of India except the State of Jammu and Kashmir. The Chapter shall come into force on such date as the Central Government may appoint. Further, it has been clarified that the Chapter shall apply to taxable services provided on or after the commencement of this Chapter. Section 65 con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness entity includes an association of persons, body of individuals, company or firm, but does not include an individual. 37] Mr. Thacker had placed reliance upon this amendment to urge that there was no intention to proceed against the Advocates because the taxable services provided or to be provided to a business entity by a business entity in relation to advice, consultancy or assistance in any branch of law alone were within the purview of the law. A explanation appeared at the relevant time below the subclause( zzzzm) and the expression business entity was defined to include an association of persons, body of individuals, company or firm, but not an individual. The argument, therefore, is that taxable service as defined is a service provided or to be provided to a business entity, by any other business entity, in relation to advice, consultancy or assistance in any branch of law, and in any manner. However, any service provided by way of appearing before any Court, Tribunal or Authority was excluded and it shall not amount to taxable service. Thus, Mr. Thacker would urge that the Central Government intended to levy Service Tax on advice, consultancy or technical assist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urther Notification of the same date services provided or to be provided by an Arbitral Tribunal or an individual advocate to any business entity located in the taxable territory is brought within the purview of service tax. This would indicate as to how the advocates have been treated unfairly and unequally. They have been brought within the net although exempted earlier from Service Tax. Broadly, the argument is that advocate render services which cannot be said to be commercial or business like. They cannot be equated with the service providers mentioned in the Finance Act 1994. Advocacy is not a business but a profession and a noble one. An advocate is a part and parcel of the administration of justice and which is a sovereign or regal function and hence providing for a Service Tax on advocates would mean that their services will no longer be available or accessible to those seeking justice from a Court of law. That would defeat the constitutional guarantee of free, fair and impartial justice, is his submission. 41] We cannot agree with him and for more than one reason. The legislature by inserting such provision has neither interfered with the role and function of an advoca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es but even in those places which can be termed as district town and cities. When advocate is group or organize themselves by making huge investments in acquiring immovable properties for professional work, heavy overheads, in the form of clerical and support staff, with facilities of cabins or rooms, then, legal services are rendered to organized groups or business entities predominantly. They may be of the nature of advice, consultancy or further acting and appearance in Courts and Tribunals. These persons can very well pay the fees and charges without any demur or complaint. It is when services are rendered to such entities and persons by not individual advocates but those working on business lines, then, if they are brought within the net of taxable services and service tax is levied on them, they can hardly complain. Their right to carry on legal profession and as per their choice can hardly be said to be taken away much less adversely affected. Mr. Pakale is right in placing reliance upon the judgments of the Hon'ble Supreme Court in which it is emphasized that in taxing legislations and statutes there is a greater latitude and discretion in the Government. In a decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of a law made by Parliament or a State Legislature (ii), no enactment can be struck down by just saying that it is arbitrary or unreasonable or irrational but some constitutional infirmity has to be found (iii), the Court is not concerned with the wisdom or unwisdom, the justice or injustice of the law as the Parliament and State Legislatures are supposed to be alive to the needs of the people whom they represent and they are the best judge of the community by whose suffrage they come into existence (iv), hardship is not relevant in pronouncing on the constitutional validity of a fiscal statute or economic law and (v), in the field of taxation, the Legislature enjoys greater latitude for classification. 42] We do not find that these principles have been in any way deviated or departed from by the Hon'ble Supreme Court later on. They fully govern the inquiry and controversy before us. If the said principles are applied to the facts and circumstances of the present case, then, we do not see any substance in the challenge based on violation of the doctrine of equality enshrined by Article 14 of the Constitution of India. 43] We have already reproduced the relevant paragraph ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly stands consumed by the service receiver. It is this principle of equivalence which is inbuilt into the concept of service tax, which has received legal support in the form of the Finance Act, 1994. To give an illustration, an Event Manager (professional) undertakes an activity, namely, of organising shows. He belongs to the profession of Event Management. As long as he is in the business or calling or profession of an Event Manager, he is liable to pay the tax on profession, calling or trade under Entry 60 of List II. However, that tax under Entry 60 of List II will not cover his activity of organising shows for consideration which provide entertainment to the connoisseurs. For each show he plans and creates events based on his skill, experience and training. In each show he undertakes an activity which is commercial and which he places before his audience for its consumption. The tax on service is levied for each show. This situation is very similar to a situation where goods are manufactured or produced with the intention of being cleared for home consumption under the Central Excise Act, 1944. This is how the principle of equivalence equates consumption of goods with consumpt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... what the amendment to the Income Tax Act, 1961 by a separate amendment Act, can do. It was further held that, the Finance Acts, though annual Acts, are not necessarily temporary Acts as they may contain provisions of a general character which are of permanent operation. Thus, Parliament is competent to introduce a charging provision in a Finance Act. In the said judgment, it had been further held that even an additional charge (surcharge) can be levied by the Finance Act for the purposes of the Union. 28. The aforesaid judgment was in the context of the Income Tax Act, 1961. However, the ratio of that judgment would apply equally to the Finance Acts enacted annually for enhancement of the rate of excise duty by levy of a fresh charge under that Act. Applying the test laid down in the aforestated judgment of this Court, we hold that a new charge by way of service tax or tax on service came to be levied statutorily by the said Finance Act, 1994, which has subsequently attained constitutional status by virtue of the Constitution (Eightyeighth Amendment) Act, 2003. .. 33. Applying the above tests laid down in the aforestated judgments to the facts of the present case, we find ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or the cost accountant or an architect has two aspects. From the point of view of the chartered accountant/cost accountant it is an activity undertaken by him based on his performance and skill. But from the point of view of his client, the chartered accountant/cost accountant is his service provider. It is a tax on services . The activity undertaken by the chartered accountant or cost accountant is similar to saleable or marketable commodities produced by the assessee and cleared by the assessee for home consumption under the Central Excise Act. 35. For each contract, tax is levied under the Finance Act, 1994 and 1998. Tax cannot be levied under that Act without service being provided whereas a professional tax under Entry 60 is a tax on his status. It is the tax on the status of a cost accountant or a chartered accountant. As long as a person/firm remains in the profession, he/it has to pay professional tax. That tax has nothing to do with the commercial activities which he undertakes for his client. Even if the chartered accountant has no work throughout the accounting year, still he has to pay professional tax. He has to pay the tax till he remains in the profession. Thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar trade or calling. It was held that if there was no show, there was no tax. 39. It was further observed that a lawyer has to pay tax to take out a licence irrespective of whether he actually practises or not. That tax is a tax for the privilege of having the right to exercise the profession if and when the person taking out the licence chooses to do so. It was held that the impugned tax on entertainment levied by the Cantonment Board was a tax on the act of entertainment resulting in a show and, therefore, the impugned law imposing tax on entertainment fell under Entry 50 of the Provincial List in Schedule VII to the GOI Act, 1935 and not under Entry 46 (similar to Entry 60 of List II). Therefore, it was held that Bombay Legislature had power to enact the law imposing tax on entertainment which had nothing to do with the law imposing tax on the privilege of carrying on any profession, trade or calling under Entry 46 (similar to Entry 60 of List Ii in the present case). Therefore, this Court has clarified the dichotomy between tax on privilege of carrying on any trade or calling on one hand and the tax on the activity which an entertainer undertakes on each occasion. The tax on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he dynamic rule of law in a developing country. . 24.We wish to put beyond cavil the new call to the lawyer in the economic order. In the days ahead, legal aid to the poor and the weak, public interest litigation and other ruleoflaw responsibilities will demand a whole new range of responses from the Bar or organised social groups with lawyer members. Indeed, the hope of democracy is the dynamism of the new frontiersmen of the law in this developing area and what we have observed against solicitation and alleged profitmaking vices are distant from such free service to the community in the jural sector as part of the profession's tryst with the People of India. 46] We do not think that these paragraphs which were heavily relied by Mr. Thacker indicate that all professionals are alike. Rather the conclusions in these paragraphs of the judgment of the Hon'ble Supreme Court would indicate that the warning given has had little impact. The profession continues to be carried on in the manner commented upon by the Hon'ble Supreme Court despite it underlying the role and monopoly status of the professional. It would not be out of place to observe that the profession i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rule against arbitrary State action. An expose of the facts of the present case will reveal how much legal ingenuity may achieve by way of persuading courts, ingenuously, to treat the variegated problems of the world of finance, as litigable public right questions. Courts of justice are well turned to distress signals against arbitrary action. So corporate giants do not hesitate to rush to us with cries for justice. The court room becomes their battle ground and corporate battles are fought under the attractive banners of justice, fairplay and the public interest. We do not deny the right of corporate giants to seek our aid as well as any Lilliputian farm labourer or pavement dweller though we certainly would prefer to devote more of our time and attention to the latter. We recognise that out of the dust of the battles of giants occasionally emerge some new principles, worth the while. That is how the law has been progressing until recently. But not so now. Public interest litigation and public assisted litigation are today taking over many unexplored fields and the dumb are finding their voice. 2. In the case before us, as if to befit the might of the financial giants involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we find that laws are undergoing a change. That change is visible if one peruses the provisions and amendments to corporate laws. Similarly, the enactments such as Securities and Exchange Board of India Act, 1992, Insurance Regulatory and Development Authority Act and Competition Act etc., result in further opportunities to the advocates of providing varied services to business entities. Thus, corporate law and corporate lawyers witnessing radical changes and reforms that the Government or the Ministry of Finance thought it fit to levy tax on these services rendered by advocates but without disturbing their essential and core professional duty. Therefore, the service tax net has been expanded and to include legal services provided to business entities. 49] There are varied services provided ranging from advice, consultation to appearance before specialised Tribunals, traditional Courts of Justice and Foreign Institutional Arbitration. Mergers and Acquisition of Companies by corporate Giants, takeover of Management or having a authoritative voice in Corporate Management and policy by subscribing or purchasing a percentage of shares, restructuring or reorganising of companies, ama ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endered to business entities by individual Advocates or a firm of Advocates. The differentiation as maintained and made takes note of the commercialisation of the practice of law. The service rendered to a individual litigant is not of the above nature and, therefore, he is rightly left out. 50) The classification between service provided to business entities and individuals, therefore, cannot be said to be illusory. The classification has a definite nexus and with the object sought to be achieved. If that is to explore and expand the sources of revenue and by widening the tax net, then, it is achieved by bringing within the fold the aforementioned services. There is, therefore, no violation of the constitutional mandate. The classification cannot be termed as arbitrary, discriminatory, unfair, unreasonable and unjust. 51] The decisions cited by Mr. Thacker on this point can be easily distinguished and on facts. Before we take note of them, we would refer to the settled and established legal principles, which are laid down in some of the Judgments of the Hon'ble Supreme Court. These Judgments summarise the principles relied upon by Shri. Pakale. In M. A. Rahman and Ors. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rahman(supra), The three Judge Bench of the Hon'ble Supreme Court examined the challenge to imposition of increased tax by Andhra Pradesh Motor Vehicle (taxation of passengers and goods) Amendment and Validation Act (34 of 1961). In negativing a challenge raised to this increased tax on the ground that it violates the mandate of Articles 14 and 19(1)(g) of the Constitution of India, the Supreme Court held as under: (7) The reasonableness of this provision as to cancellation of registration certificate has to be judged in the background of what we have already said about the purpose of the levy and its liability on the seller. It is true that there are other provisions in the law for realisation of public dues from those who default in making payments; but generally speaking cancellation of registration in cases like these is one more method of compelling payment of tax which is due to the State. Collection of revenue is necessary in order that the administration of the State may go on smoothly in the interest of the general public. The State has therefore armed itself with one more coercive method in order to realise the tax in such cases. It is true that cancellation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012 the Advocates suffered in any manner and particularly pointed out in C.Krishna Moorthy's case (supra). 54] Lastly, reference can usefully be made to another Judgment of the Hon'ble Supreme Court in the case of the Malva Bus Services Pvt. Ltd. vs. State of Punjab and Ors. AIR 1983 SC 634. There as well the Hon'ble Supreme Court held that the mere fact that a tax falls more heavily on certain goods may not result in its invalidity. In that regard and by holding that such a stipulation would not make the levy confiscatory in character, the Hon'ble Supreme Court held as under: 21. The next submission urged on behalf of the petitioners is based on Article 14 of the Constitution. It is contended by the petitioners that the Act by levying ₹ 35,000/as the annual tax on a motor vehicle used as a stage carriage but only ₹ 1,500/as per year on a motor vehicle used as a goods carrier suffers from the vice of hostile discrimination and is, therefore, liable to be struck down. There is no dispute that even a fiscal legislation is subject to Art. 14 of the Constitution. But it is well settled that a legislature in order to tax some need not tax all. It can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to carry on the said business. It is, however, open to the State Government to make any modifications in the fares if it feels that there is a need to do so. But the impugned levy cannot be struck down on the ground that the operation of stage carriages has become uneconomical after the introduction of the impugned levy. Moreover the material placed by the petitioners is not also sufficient to decide whether the business has really become uneconomical or not. We do not, therefore, find any merit in this ground also. 55] Applying these principles to the facts and circumstances before us, we do not find that levy of service tax on a limited category and class of professionals, namely Advocates, the burden of which does not fall on them but on the receiver of the service, can be said to be violative of the guarantee or right under Article 19(1)(g) of the Constitution of India. 56] In the first decision, which was cited before us by Mr. Thacker, [All India Sainik Schools Employees' Association V/s. Defence MinistercumChairman Board of Governors, Sainik Schools Society, New Delhi and others] (supra) the Hon'ble Supreme Court was dealing with the Writ Petition seeki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely because additional licenses were granted to the Petitioners they cannot claim the benefit of the relaxation. It is on this finding that the principle referred above was applied. This judgment cannot assist the Petitioner. Rather it would support our conclusions. Just as there cannot be any discrimination but equality must be maintained between equals, unequals cannot be treated equally. The Court found that the two classes and two persons were unequals. 59] The orders of admission of similar Writ Petitions by other High Courts in India cannot assist the Petitioners either. 60] The Petitioner has relied upon the judgments and particularly on the role of advocates to which we have already made a detailed reference. In the same decision, the Hon'ble Supreme Court has strongly commented upon the falling standards in the profession. Mr. Thacker places reliance on the code of professional ethics carved out by the Bar Council of India to support his argument on the role and status of the advocates in the society. We have referred to this very code and emphasized that the advocate gives benefit of his service to the litigant and the litigant/client approaches him because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness entity or a business entity with a turnover upto ₹ 10 lakhs in the preceding financial year are exempt from the whole of the service tax leviable thereon under section 66B of the Finance Act. Therefore, the small businessman, petty traders and persons carrying on business in individual capacity would be able to afford the services of individual advocates or a partnership firm of advocates. In such circumstances and when the term 'business entity' has been understood to include a individual he will not be deprived of quality legal services if his turnover in the preceding financial year is within the limits specified above. 62] The next notification is no.30/2012 dated 20th June, 2012 and that while superseding the earlier Notifications of 31st December, 2004 and 17th March, 2012 proceeds to notify the taxable service and the extent of service tax payable thereon by the person liable to pay service tax for the purpose of section 68(2). Now, the taxable services provided or agreed to be provided by an Arbitral Tribunal or an individual advocate or a firm of advocates by way of support services to any business entity located in the taxable territory are brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lled did not exist. See the observations in Mukkuduns of Kimkunwady V/s. Inamdar Brahmins of Soorpal, (184146) 3 Moo Ind App 383. See also Bachawat's Law of Arbitration at page 1. 7. When power came to the East India Company, they framed Regulations in exercise of the power vested in them by the British Government. Some of these Regulations were touching arbitration. Bachawat gives description of the evolution of the Arbitration Act, 1940. Therefore, arbitration as a mode for settlement of disputes between the parties, has a tradition in India. It has a social purpose to fulfill today. It has a great urgency today when there has been an explosion of litigations in the Courts of law established by the sovereign power. New rights created, or awareness of these rights, the erosion of faith in the intrinsic sense of fairness of men, intolerant and uncompromising attitudes are all the factors which block our courts. The courts are full of litigations, which are pending for long time. Therefore, it should be the endeavour of those who are interested in the administration of justice to help settlement by arbitration, if possible. It has also a social efficacy being the decision by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttempt is to impress upon them the fact that they are perceived as Alternate Dispute Redressal Mechanism and brought into effect to promote a socially laudable cause. It is not an opportunity to make money post retirement as was noted by none other than Hon'ble Mr. Justice J. S. Verma, Ex Chief Justice of India. He never earned money as an Arbitrator till his death. However, it is the recipient who will bear the burden. In such circumstances, we do not find that the Notification make any difference to the position noted by us. Once the law has been amended and the burden now falls on the recipient, then, all the more the advocates whether appearing either individually or as a firm can hardly complain. They come within the tax bracket only because they are rendering service to a business entity located in the Taxable territory. It is only such service which is taxable. The individual advocate rendering service to individual is not in any manner affected. Despite supersession of the Notification dated 17th March, 2012 his position is not altered or changed in any manner. The services rendered by an individual advocate to any person other than a business entity or to an individual ..... X X X X Extracts X X X X X X X X Extracts X X X X
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