Service Tax on Individual Advocate? Not When Notifications Say ‘Nil’: Bombay High Court Quashes Demand and Bank Lien

“Designated Officer Acted Without Jurisdiction by Ignoring Binding Exemption Notifications”, In a decisive ruling on service tax liability of advocates, the Bombay High Court has held that no service tax could be levied on an individual advocate for legal services rendered to a partnership firm of advocates, in view of clear exemption and reverse charge notifications issued under the Finance Act, 1994.

Division Bench comprising Justice G. S. Kulkarni and Justice Aarti Sathe quashed the Order-in-Original dated 15.03.2023 confirming service tax demand, as well as the consequent recovery notice and bank account lien.

The Court held that the impugned proceedings were “without jurisdiction”, as they were contrary to binding Notifications No. 25/2012-ST and 30/2012-ST dated 20.06.2012.

Service Tax Demand Based on Alleged Mismatch

The petitioner, an advocate enrolled with the Bar Council of Maharashtra and Goa since 2007, received a show cause notice dated 27.10.2021 alleging mismatch between Income Tax Returns, TDS data and ST-3 returns for the financial year 2016–17. The Department alleged non-discharge of service tax liability of ₹26,81,250.

The show cause notice and hearing notices were dispatched to the petitioner’s old address and were never received. Consequently, an Order-in-Original dated 15.03.2023 was passed confirming service tax, interest and penalty.

Thereafter, a recovery notice under Section 87 of the Finance Act, 1994 was issued on 31.10.2025, and liens were created on the petitioner’s bank accounts with ICICI Bank and Axis Bank.

Challenging the levy and consequential recovery, the petitioner approached the High Court under Article 226 of the Constitution.

“Services by Individual Advocate to Firm of Advocates – Service Tax ‘Nil’”

The petitioner contended that in view of Notification No. 25/2012-ST and Notification No. 30/2012-ST dated 20.06.2012, service tax was either exempt or payable under reverse charge with “Nil” liability on the service provider.

The Court examined the relevant extracts from the notifications, particularly:

“Services provided by – (b) an individual as an advocate or a partnership firm of advocates by way of legal services to, – (i) an advocate or partnership firm of advocates providing legal services;”

Under Notification No. 30/2012-ST, the table specified that in respect of services provided by an individual advocate by way of legal services, the percentage of service tax payable by the service provider was “Nil”, and 100% was payable by the recipient under reverse charge.

The Bench observed:

“It is thus clear that as set out in the Notification, the taxable service in respect of services provided or to be provided by the individual advocate for a firm of advocates has been set out to be ‘Nil’.”

Jurisdictional Error: Binding Notifications Ignored

The Court held that the Designated Officer failed to consider the binding statutory notifications while passing the Order-in-Original.

Relying on its earlier decision in Advocate Pooja Patil v. Deputy Commissioner, CGST and CX Division VI, the Court reiterated:

“Certainly the Designated Officer has acted without jurisdiction having acted contrary to the binding notifications.”

The Bench emphasized that when the legal position is clear from statutory notifications issued under Section 93 and Section 68 of the Finance Act, 1994, the Department cannot proceed to levy service tax on the individual advocate.

The Court declined to remand the matter, observing that no useful purpose would be served when the jurisdictional error was apparent on the face of the record.

Recovery Proceedings and Bank Lien Also Set Aside

Since the foundational demand itself was without jurisdiction, the consequential recovery notice dated 31.10.2025 and the bank account liens created under Section 87 of the Finance Act, 1994 were also quashed.

The Court allowed the petition in terms of prayer clauses seeking:

quashing of the Order-in-Original dated 15.03.2023,
quashing of the Recovery Notice dated 31.10.2025, and
quashing of the Show Cause Notice dated 27.10.2021.

Natural Justice Issue Not Determinative

Though the petitioner had also raised a plea of violation of natural justice on the ground that notices were sent to an old address, the Court allowed the petition primarily on the foundational issue of non-leviability.

Given the clear statutory position, the Court found remand unnecessary.

This judgment reinforces that service tax liability of advocates must be examined strictly in light of exemption and reverse charge notifications issued under the Finance Act, 1994.

The Bombay High Court has clarified that services rendered by an individual advocate to another advocate or firm of advocates attract “Nil” liability on the service provider under the reverse charge mechanism. Any attempt to levy service tax contrary to these binding notifications is without jurisdiction.

The ruling provides significant relief to advocates facing legacy service tax demands and underscores that statutory notifications cannot be ignored by adjudicating authorities.

Date of Decision: 05 February 2026