Bombay High Court: Setting aside the writ petitions filed by The Bombay Bar Association, Advocates Association of Western India and a few lawyers, a division bench comprising of SC Dharmadhikari and AA Sayed, upheld the levy of service tax on services provided by lawyers and law firms, to their business clients. In the present case, the petitioners had contended that as lawyers are “officers of the court” who help in the administration of justice hence no service tax levy should be imposed on their services. In addition to their key contention, they also pleaded that the levy of service tax imposes a heavy additional burden on litigants which disables them from approaching the courts. It was also contended that such a provision was unconstitutional because it discriminates between services provided to an individual, where there is no service tax imposition and to a large business entity which has to bear the service tax burden.
The service tax authorities and the central government who were the respondents to this case, argued that even as lawyers provide assistance in administering justice, they do in fact provide services to their clients and are duly compensated in the form of fees which are charged from clients. It was also pointed out that the classification between legal services provided to business entities and to individuals, for the purpose of levy of service tax, was not discriminatory and does not violate the Constitution. It was further contended that representational legal services provided to individuals were kept out of the service tax net to ensure the burden is not borne by the common man. As there was a rational nexus, it was not discriminatory against business entities and this has been the position taken earlier by the Supreme Court.
The Court after listening to arguments on both sides, observed that the legislature in introducing service tax on the legal profession had noted the commercialization of the practice of law which has expanded in scope and sphere post liberalization and globalization. The Court concluded that the fact that a lawyer is an officer of the court and part and parcel of the administration of justice was not ignored, instead by a rational and intelligible differentiation the Parliament had proceeded to levy and impose service tax only on legal services rendered to business entities by an individual advocate or law firm and thereby dismissed the petition. PC Joshi vs Union of India, 2014 SCC OnLine Bom 1858, decided on 15-12-2014
