Orissa High Court Quashes Service Tax Demand Against Practicing Advocate, Affirms Legal Exemption [Read Order]

Orissa: The Orissa High Court has delivered a significant ruling quashing service tax demand notices issued to a practicing lawyer, reaffirming that legal practitioners are exempt from such levies under specific conditions.

Chief Justice Harish Tandon and Justice B.P. Routray made crucial observations regarding the exemption of lawyers from service tax obligations while addressing the case of a practicing advocate from Bhubaneswar.

The court dealt with a writ petition filed by the advocate challenging notices demanding service tax amounting to Rs. 2,14,600 for the Financial Year 2015–16, along with a penalty of Rs. 2,34,600 plus interest, issued by the Superintendent (ARC), GST and Central Excise, Bhubaneswar-II Division.
Referring to a previous order dated 31st March 2021, the court emphasized:

“Practicing advocates should not face harassment on account of the Department issuing notices calling upon them to pay service tax/GST when they are exempted from doing so, and in the process also having to prove they are practicing advocates.”

The court highlighted departmental instructions issued on 9th April 2021 and 15th April 2021, which clarified that “services provided by an advocate or a partnership firm of advocates providing legal services to any person other than a business entity, and to a business entity with a turnover up to rupees ten lakhs in the preceding financial year, are exempted from the levy of service tax.”

In its specific directive, the court stated:

“The demand-cum-show cause notice dated 15th April 2021 and the order of recovery dated 28th January 2025 are quashed to the extent they relate to the demand of service tax from the income of the petitioner from his profession as an individual lawyer.”

The court noted that tax authorities had initiated proceedings based on third-party information from the Income Tax Department regarding Ray’s income, despite clear exemptions applicable to practicing lawyers.

However, the court permitted the department to proceed with regard to the petitioner’s income from house property, if applicable for service tax levy, as disclosed in his income tax returns for the Assessment Years 2018–19 and 2020–21.

Mr. M.M. Patnaik, Advocate, appeared for the petitioner, while Mr. T.K. Satapathy, Senior Standing Counsel, represented the respondents.

Case Title: Shivananda Ray vs. Principal Commissioner CGST and Central Excise, Bhubaneswar and Others

[Read Order]