Appropriate Court for filing appeal for Rate of duty & Classification issues

PJ/Case Laws/2011-12/1311

Case: COMMISSIONER OF CENTRAL EXCISE, MANGALORE v/s RAI & ASSOCIATES

Citation: 2011 (23) S.T.R. 210 (Kar)

Issue:- Issue relating to rate of duty and classification – Appeal to High Court not maintainable – Appeal lies to Apex Court under Section 35L of CEA, 1944.

Brief Facts:- Appellant are chartered Accountant. They were being outsourcing the work of ledger maintenance and billing for M/s. MESCOM.

Department alleged that the assessees offered their services in their professional capacity of practicing chartered accountants and they were liable to attract service tax in terms of Notification No. 59/1998-ST.

The First Appellate Authority held that the relationship between the assessee and M/s. MESCOM is not that of practicing chartered accountants and a client but that of an agent and his principal. The service so provided therefore does not fit into the description of taxable service in terms of Section 65(105)(s). The contract is for outsourcing the work of ledger maintenance and billing and not for hiring a chartered accountant for his specialized professional skills of accounting which involved application of principles and procedures of accounting which cannot be dispensed with on account of computerization of ledgers and which cannot be attended by persons other than a chartered accountant. The services were neither offered nor provided as a professional service of accounting attracting service tax liability in terms of Notification No. 59/1998-S.T. by attracting classification under category of services provided by a practicing chartered accountant. Therefore, the first appellate authority set aside the order confirming the liability of service tax and other consequential liabilities under the classification of services of practicing chartered accountant for services of ledger maintenance rendered to M/s. MESCOM in terms of the contract.

In appeal, the Tribunal dismissed the appeal. The Tribunal in its order set out the definition given in the Chartered Accountant Act, 1949 and on an elaborate consideration of the statutory provisions and the material on record held that the activity of outsourcing of meter reading, billing and ledger posting which was an activity to be done by the respective companies does not come within the ambit of the professional activity of chartered accountant. The three companies had out sourced the work to other private parties also who were not chartered accountants. The employees were not getting trained as chartered accountants under the Chartered Accountants Act. They were unskilled personnel without qualifications and were only doing manual work. The employees were covered under the various labour legislations such as Contract Labour (Regulation and Abolition) Act, 1970 and Minimum Wages Act.

Department is in appeal before the High Court.

Reasoning of Judgment:- The High Court held that the dispute related to rate of duty and classification. It was held that the question raised in this appeal falls squarely within the exception carved out in Section 35G, an order relating, among other things, to the determination of any question having a relation to the rate of duty of excise or to the value of goods for purposes of assessment’. It was held that the High court has no jurisdiction to adjudicate the said issue, as held by this court in the case of Commissioner of Central Excise v/s M/s Mangalore Refineries and Petro Chemicals Limited [2011 (270) ELT 49 (Kar)]. The appeal lies to the Apex Court under Section 35L which alone has exclusive jurisdiction to decide the said question.

Appeals rejected as not maintainable, reserving liberty to the Revenue to approach the Apex Court.

Decision:- Appeal rejected.

Comment: - There is clear cut Rule in statue that the rate and classification dispute will go to Highest Court of India. But many a times the appeal is being filed in High Court. This will lead to depriving of his legal remedy to go to Supreme Court. If he files appeal in Apex Court now, it will time barred. However, the High Court has given liberty to Revenue to approach Apex Court.

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PJ/Case Laws/2011-12/1311

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