CHARTERED ACCOUNTANTS ASSOCIATION Vs. UNION OF INDIA

JUDGEMENT

(1.) . In these petitions under Article 226 of the Constitution, the Chartered Accountants' Association and the Gujarat Institute of Civil Engineers & Architects have challenged the constitutional validity of Section 88 of the Finance Act, 1997 and Section 116 of the Finance (No. 2) Act, 1998 levying service tax on the Consulting Engineers and Architects and also on the practising Chartered Accountants The Gujarat Institute of Civil Engineers & Architects is a registered association of Engineers and Architects of Gujarat. It has about 2600 members and Special Civil Application No. 7220/99 is filed on their behalf. Petitioner Nos. 2 and 3 in the said petition are Consulting Engineers and past/present office bearers of the said association. The Chartered Accountants' Association is an association of 1000 practising Chartered Accountants in the State of Gujarat. Special Civil Application No. 469/99 is filed by the association on behalf of its members. Petitioner No. 2 in the said petition is a practising Chartered Accountant.

(2.) Service tax was introduced by the Finance Act, 1994. Chapter V thereof contains the scheme and provisions relating to the tax. Section 66 imposed service tax at the rate of 5% of the value of taxable services provided to any person by the person responsible for collecting the service tax. Taxable service was defined in Section 65(1) to include certain services provided by stockbroker, telegraph authority and general insurer. The persons providing the services were liable to recover the tax and pay the same to the Central Government under Section 68 of the Act. The ambit of the levy was widened by the Finance Act, 1997 and section 65 was substituted so as to include a wide variety of services including under clause (g) services provided to a client by a consulting engineer. A few other services were also covered under the Act. It appears that representations were made against such levy by persons carrying on different professions/callings. Section 116 of the Finance Act, 1998 substituted Section 66 of the Finance Act, 1994. While a few services covered by the 1997 Act were excluded from the purview of the service tax, a few more services were included. Services provided by the Architects, Interior Decorators, Chartered Accountants, Cost Accountants and Company Secretaries were covered by the levy of tax. It appears that representations were made by the Associations representing various professions/callings. The respondent authorities thereafter issued notifications dated 7.10.1998 and 16.10.1998 clarifying which services of practising Chartered Accountants are exigible to service tax and exempting such taxable services provided by the practising Chartered Accountants/Company Secretaries/Cost Accountants in their professional capacities.

(3.) While admitting the petitions, the Court granted ad-interim relief restraining the respondents from enforcing in any manner the provisions of Section 88 of the Finance Act, 1997 and Section 116 of the Finance Act, 1998 in so far as they levy service tax on services provided to the respective clients by consulting engineers, architects and practising chartered accountants. It appears that the Court was informed that the provisions levying service tax on the professions have been challenged before various High Courts including Madras High Court, Calcutta High Court and Rajasthan High Court where interim stay against levy of service tax was granted. In response to the Rule, the affidavit in reply has been filed by the Assistant Commissioner, Central Excise, Service Tax Cell, Ahmedabad in each petition.