Shivananda Ray vs. Principal Commissioner CGST And Central Excise, Bbsr

Facts

The Petitioner, Shivananda Ray, a practicing advocate in Bhubaneswar, received a notice dated April 15, 2021, demanding service tax of Rs. 2,14,600/- for the Financial Year 2015-16 under Section 73 of the Finance Act, 1994. This was followed by a recovery notice dated January 28, 2025, for the same service tax amount, plus a penalty of Rs. 2,34,600/- and interest, issued by the Superintendent (ARC), GST and Central Excise, Bhubaneswar-II Division. The Petitioner sought to quash these notices, arguing that as an individual legal practitioner, he is exempt from such demands. The Department contended that the demand notice was issued under Section 73 of the Finance Act, 1994, for contravening Sections 67, 68, 69, and 70, and that the Petitioner did not cooperate, leading to an ex-parte adjudication.

Held

The Court held that the Petitioner, being an individual practicing lawyer, is exempt from the levy of service tax on income derived from his legal services. This decision was based on the admitted fact that the Petitioner is a practicing lawyer and in light of the High Court's earlier directions in WP(C) No. 27727 of 2020, which directed the Commissioner GST to issue clear instructions to prevent harassment of lawyers by demanding service tax/GST. The Court also noted the subsequent departmental instructions issued on April 9, 2021, and April 15, 2021, reiterating that services provided by advocates to certain entities are exempted. Consequently, the demand-cum-show cause notice dated April 15, 2021, and the recovery order dated January 28, 2025, were quashed to the extent they related to the demand of service tax from the Petitioner's income as an individual lawyer. However, the Court observed that the Petitioner had disclosed income from house property in his income tax returns, and it remains open for the Department to proceed in accordance with law regarding any applicable service tax on income from house property.

Key Issues

1. Whether the demand for service tax from a practicing advocate for legal services rendered is valid, considering previous High Court pronouncements and departmental instructions? (Section 73 of the Finance Act, 1994, read with relevant exemption notifications and circulars). Petitioner's Argument: The Petitioner argued that as a practicing advocate, he is exempt from service tax on his professional income, citing a previous order of the High Court dated March 31, 2021, and subsequent departmental instructions. He contended that the notices were issued in contravention of these established positions. Revenue's Argument: The Department argued that the demand-cum-show cause notice was issued under Section 73 of the Finance Act, 1994, for alleged contravention of Sections 67, 68, 69, and 70 of the Finance Act read with Finance Rules. They stated that the Petitioner failed to cooperate, leading to an ex-parte adjudication and subsequent recovery proceedings.