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SILF vs Union of India - law firm service tax litigation grounds

In the case, the Society of Indian Law Firms (SILF) is taking the Government to court for putting law firms under the service tax regime.

These are SILF's grounds of the writ and the relief sought.

A: Service tax is a tax on "service" and not on the "service provider". As such, so long as the nature of "service" remains the same, the form or the business organisation of the service providers/recipient is completely irrelevant, immaterial and extraneous to the object and purpose of the Act.

B: The nature of service, provided and consumed by individuals on the one hand and firms/corporate/ associations on the other is the same, and as such there is no intelligible differential for the purported classification.

C: It appears that the purport of the impugned provision is to levy tax on Law Firms and Corporate Clients whilst excluding individual advocates and individual clients. Thus, the tax sought to be imposed is really a tax on the service provider/recipient and not on service, thus being violative of Article 19(1)(c) of Constitution of India.

D: The basis of classifying legal service providers/recipients into, two groups, viz. individuals and business entities, has no rational nexus/connection sought to be achieved by the Act.

E: The differentiation between "Law Firm" and an "individual" under the Impugned Provisions is arbitrary, unintelligible, unreasonable, discriminatory and has no rational nexus to the object sought to be achieved. Such a classification creates a hostile discrimination between advocates as a class in itself.

F: The levy of service tax on Law Firms is a restriction on the freedom of individual advocates to practice the profession of law by forming an association or partnership duly authorised by law as it imposes unreasonable conditions. The imposition of service tax would be a significant determent to advocates organising themselves into firms.

G: The purported classification of services into services rendered by way of appearance in Court and other services which are provided in aid thereof, is irrational, arbitrary and violative of Article 14 of the Constitution of India.

H: The Impugned Provisions of the Act are palpably irrational and arbitrary and deserve to be struck down.

I: The Impugned Provisions seek to levy service tax only on a part of the activities of a law firm in as much as it excludes from the scope of levy, services provided by way of appearances in courts and services of any kind provided to individuals. Under the CENVAT Credit Rules, 2004 Rule 6 permits availment of CENVAT credit only on inputs, capital goods and input services, only to the extent they are used for providing taxable output services. It provides for a mechanism by which the extent of credit can be availed by an output service provider.

J: A Law Firm is not a "business entity" and the Impugned Provision so far as it provides for inclusion of a Law Firm within the definition of "business entity" is illegal, arbitrary and bad in law.

a) issue a writ of mandamus declaring Section 65(105)(zzzzm) and Section 66 of the Act, as amended by the Finance (No.2) Act, 2009 in so far they provide for levy of service tax on law firms;

b) restraining the Respondents from implementing or taking any steps in furtherance of the 65(105)(zzzzm) and Section 66 of the Act;

c) pending the hearing and final disposal of the petition, restrain and prohibit the Respondents from implementing or taking any coercive steps or actions against the Petitioners.

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