1. These Revenue's appeals arise from the respective Order-in-Appeal passed by the Commissioner of Central Excise (Appeals), Mangalore. The issue involved in these appeals is common and hence they are taken up together for the disposal as per law.
2. The Respondents are Chartered Accountants. They were awarded contract by M/s Mangalore Electricity Supply Company, Mangalore (hereinafter referred to as 'MESCOM' in short) for the purpose of sending the ordinary clerks who have completed S.S.L.C. for recording the electricity meter reading and ledger maintenance relating to billing activities on behalf of M/s MESCOM. The Revenue considered that these activities were carried out by the Chartered Accountants independently in their professional capacity and such activity comes under the category of "Practicing Chartered Accountant". Hence the Service Tax demand has been raised along with Education Cess. After due consideration, the Original authority confirmed the interest and penalty. However the Commissioner (Appeals) after due consideration noticed that the Respondents, Chartered Accountants were carrying out the ledger maintenance work in terms of the contract and that services rendered are not a professional service of accounting rendered by a practicing chartered accountants. The finding recorded in one of the Orders-in-Appeal No. 241/2006 CE dated 02.08.2006 at Paragraphs 10 to 13 of the order is reproduced herein below: 10. I find from the written submission and extracts from a text book on Accountancy by B.S. Raman, furnished at the time of personal hearing, that book keeping/ledger maintenance though an essential part of accounting process, cannot by themselves amount to a professional service of accounting offered by a practicing chartered accountant. Book keeping or ledger maintenance is the process of recording business transactions in appropriate books of account in a systematic manner so as to ascertain and understand the result and effect of these transactions in form of a statement of their result.
I find that the ledger maintenance work attended by the appellant is conferred to certain specified transactions and not all business transactions of M/s MESCOM. Thus even as book keeping the work cannot lead to any accounting. The area so specified is billing, recoveries and generation of related list and reports. On the other hand the professional service of accounting requiring the services of a practicing chartered accountant as a matter of necessity attracting tax liability in terms of Notification No. 59/1998 ST, covers a much wider area than mere ledger maintenance. Accounting involves identification and summarization of all business transactions of a client, analysis and interpretation of results thereof and communicating the result of this interpretation to the end user for decision making. The appellant could have been held liable to tax for having rendered accounting service only if he had maintained ledgers and carried out all the process referred above for ultimately drawing a balance sheet for M/s. MESCOM. Ledger maintenance per se is not a taxable service of accounting done by chartered accountant in his professional capacity.
11. It is therefore clear from the scope of contract that the appellant actually provided services of ledger maintenance, by way of deputing manpower, as per plans and specification already determined for transactions limited to the area of billing, recoveries, etc. and generated relevant MIS and DCB statement. These statements and reports do not amount to a balance sheet for M/s MESCOM. I therefore come to a conclusion that services provided by the appellant to M/s MESCOM do not amount to a professional service of accounting provided by a practicing chartered account and accordingly did not attract service tax liability in terms of Notification No. 59/1998 ST. I also hold that ledger maintenance is only an ingredient and process of professional accounting, which involves several other stages and processed resulting in production of a balance sheet for the: client. The work of ledger maintenance by a practicing chartered accountant did not attract Service Tax under Notification No. 59/1998 ST. 12. I find that the appellant had got himself registered under the classification of Business. Auxiliary Services for purpose of discharging Services Tax liability on remuneration received from M/s MESCOM for providing ledger maintenance service as per contract with effect from 01.07.2003 and has discharged liabilities accordingly.
The adjudicating authority has vide the order impugned disallowed the declaration filed by appellant under Business Auxiliary Service classification and has proposed to adjust amounts already paid against liabilities confirmed now without assigning any reason for disallowing the declaration.
13. In view of tie above discussion, I set aside the Impugned order confirming 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 on the ground that services rendered are not a professional service of accounting rendered by a practicing chartered accountant. I also set aside that part of the impugned order disallowing classification under Business Auxiliary Service on the ground that impugned order is non-speaking.
The other orders are also similar as extracted from the above order.
The Revenue is aggrieved with these impugned Orders-in-Appeal. They have taken several grounds for setting aside the impugned orders and pray for restoration of the Orders-in-Original. In the 'Grounds of Appeals', the Revenue contends that the service contract has been specifically awarded to the 'Practicing Chartered Accountants'. The services rendered by them were in the nature of ledger maintenance work, with the responsibility of maintaining true and proper accounts relating to billing activities of MESCOM which is otherwise called as "Management of Accounts of Consumer". The book keeping is the science of recording transactions in money or money's worth in such a manner that, at any subsequent date, their nature and effect may be clearly understood and when required a combined statement of their result may be prepared. They have cited the American Institute of Certified Public Accounts, which gives a meaning of accounts and in terms of the said definition, the Revenue is contending that the service rendered by the respondents to the MESCOM comes within the ambit of "Practicing Chartered Accountants". Similar plea has been taken in the grounds of other appeals. It is the argument that the activity of recording electricity meter reading by Clerks of the Chartered Accountants, preparing the bills and maintaining fine accounts and register comes within the ambit of Section 105(5) of the Chartered Accountants Act, 1949 which defines the activity of Chartered Accountants.
3. The learned DR reiterates the 'Grounds of Appeals' and submits that the Orders of the Commissioner (Appeals) are not legal and proper and require to be readdressed by referring the issue to the Larger Bench of the Tribunal, although this Bench has decided the very issue in the assessee's favour in the case of Jaded Siddappa and Co. and Ors. v.Commissioner of Central Excise, Mangalore and Ors. by Final Order No.1146 to 1148/2007 dated 26.09.2007. He refers to the Hon'ble Supreme Court's judgment rendered in the case of All India Fedn. of Tax Practitioners v. Union of India 2007 (7) S.T.R. 625 (S.C.) which has overruled the Chartered Accountant's plea of levy of Service Tax on them. He also refers to the judgment of the High Court of Gujrat at Ahmedabad rendered in the case of Chartered Accountants Association v.Union of India 2006 (2) S.T.R. 300 (Guj.) which also upheld the levy of Service Tax on the Chartered Accountants. He also refers to the Madras High Court's judgment rendered in the case of Indian Institute of Architects v. Union of India 2006 (2) S.T.R. 393 (Mad.) which also upheld the levy of Service Tax on the Chartered Accountants and the Architectures.
4. The learned Counsels appearing for the Respondents contended that they are not challenging the constitutional validity and the levy of Service Tax under the category of 'practicing chartered accountants'.
It is the submission that the part of contract entered into by MESCOM is not the activity of 'practicing chartered accountants' as the present activity is done by non-professional chartered accountants also. It is merely clerical work of non-professional employees who were employed on contract basis. They were covered under the various Labour Legislations such as Contract Labour (Regulation and Abolition Act, 1970) and Minimum Wages Act. It is the submission that all these aspects have been gone into detail by this Bench in the case of Jaded Siddappa and Co. and Ors. v. C.C.E. Mangalore and Ors. by Final Order Nos. 1146 to 1148/2007 dated 26.09.2007. The Bench has examined the terms of the contract and the provisions of Chartered Accountants Act, 1949 and thereafter clearly held that the activity of outsourcing of meter reading, billing and the maintenance of ledger does not come within the ambit of the professional activity of the Chartered Accountants in terms of the Chartered Accountants Act, 1949. He submits that the issue has been settled in the assesee's favour in the cited Final Order and the same has been followed by larger number of similar orders and prays for dismissal of the Revenue's appeals. He submits that the citations referred to by the learned DR refers to the constitutional validity of levy of the Service Tax on the Chartered Accountants and he argues, while in the present case, the issue is not levy of Service Tax on the Chartered Accountants but one of the functions done by them which is not part of the work of the Chartered Accountant.
5. The learned DR also refers to the judgment of the Tribunal rendered in the case of C.M. Jain and Co. v. Commissioner of Central Excise and Customs, Jaipur 2006 (2) S.T.R. 214 (Tri. - Del.) which also deals about the constitutional validity of levy of Service Tax on the Chartered Accountants.
6. The learned Advocate, Shri Anil Kumar points out the contract entered into by the MESCOM and submits that the activity undertaken by the chartered accountants was only a substitute till computerization of the work of the MESCOM is carried out. It is only a manual work to be done and not an activity requires to be done by professional Chartered Accountants.
7. The learned DR in counter submits that the contract has been given to the chartered accountants based on the expertise gained by them in their work which is done by them in terms of definition given by the Chartered Accountants institute of America. He submits that the Chartered Accountants Regulation also refers to similar activity and that activity comes under the category of 'Practicing Chartered Accountants'. Hence the activity of billing on behalf of MESCOM has to be considered as an activity of 'Practicing Chartered Accountants. He refers to the finding given by the Madras High Court rendered in the case of Indian Institute of Architects (supra) and points out that the Chartered Accountants had discharged the Service Tax voluntarily under the category of "Business Auxiliary Service".
8. The learned Counsel contends that in these appeals, the Revenue has proceeded to consider the activity under the category of 'Practicing Chartered Accountants' and not under the category of 'Business Auxiliary Service'. It is also pointed out that the Commissioner (Appeals) in the impugned order has also overruled the Revenue's contention to bring the activity within the ambit of Business Auxiliary Service'.
9. On a careful consideration of the submissions made by both the sides, I notice that the citations relied on by the learned DR pertains to constitutional validity of levy of Service Tax on the Chartered Accountants and Architectures. This point has not been adjudicated in these appeals and what the point adjudicated is about specific contract entered into by the MESCOM to carry out the activity of outsourcing of meter reading, billing and maintaining ledger account on behalf of the MESCOM. The Chartered Accountants took these activities as special activity and they employed non-professional persons and not aspirant articled staff who wants to become a Chartered Accountants. These employees were covered under various Labour Legislations such as Contract Labour (Regulation and Abolition Act) and Minimum Wages Act.
Therefore the Tribunal after due consideration in the case of M/s Jaded Siddappa & Co. and Ors. by Final Order No. 1146 to 1148/2007 dated 26.09.2007 upheld the assessee's contention that the activity carried out by the Respondents on behalf of M/s MESCOM does not come within the definition of Chartered Accountants Act. The findings recorded in Paragraphs 6 and 6.1 of cited Final Order are reproduced herein below: 6. On a careful consideration and examination of the definition given in the Chartered Accountants Act and the provisions thereunder, which are referred in the written submission on this point brought out by the counsel in the paper book at page 59, 60, 61 and 62, which is as follows: As per the definition given in the Chartered Accountants Act, 1949, A member of the Institute shall be deemed to be in practice when individually or in partnership with Chartered Accountants in practice, he in consideration of remuneration received or to be received.
(i) engages himself in the practice of accountancy. Comment: It is to be noted that this does not cover raising of bills and maintenance of ledgers.
(ii) offers to perform or performs services involving the auditing or verification of financial transactions, books, accounts or records or the preparation, verification or certification of financial accounting and related statements or holds himself out to the public as an account; or Comment: This also does not cover the raising. If it were the verification of bills raised by others then it would be applicable.
(iii) readers professional services or assistance in on about matters of principle or detail relating to accounting procedure or the recording, presentation or certification of financial facts or data; or Comment: This is also about advise or guidance for recording or accounting and not the recording itself.
(iv) readers such other services as, in the opinion of the Council are, or may be rendered by the Chartered Accountant in practice, and the words "to be in practice" with their grammatical variations and cognate expressions shall be construed accordingly.
Pursuant to Clause (iv) above the Council has resolved that in its opinion the services that may be rendered by a Chartered Accountant in practice includes b. in his professional capacity (and neither in his capacity nor in his capacity as an employee), acts as a liquidator, trustee, executor, administrator, arbitrator, receiver, adviser or representative of costing, financial or taxation matters or takes up an appointment made by the Central Government or a State Government or a Court or law or any other legal authority or acts as Secretary unless his employment is on a salary-cum-full time basis.
The Council has clarified the scope of the expression "Management Consultancy Services" as follows: Management Consultancy Services' shall not include the functions of statutory or periodical audit, tax (both direct taxes and indirect taxes) representation or advice concerning tax matters or acting as liquidator, trustee, executor, administrator, arbitrator or receiver, but shall include the following.
(ii) Capital structure planning and advice regarding raising finance by issue of capital or by way of borrowings.
(v) Preparing Cash Budgets, Cash flow statements, profitability statements, Statement of Sources and application of funds etc.
(xii) Setting up executive incentive plans, wage incentive plan, etc. (xiii) Management and operational audits.
(xv) Business policy, Corporate planning, Organisational Development, Growth and diversification.
(xvi) Organisational Structure and behavior, development of human resources including design and conduct of training programmes work study job description, job evaluation and evaluation of work loads.
(xvii) System analysis and computer related services including selection of hardware development of software in all areas of services, which can otherwise be rendered by chartered accountant in practice and also to carryout any other professional services relating to EDP. Comment: The services of raising bills or maintaining the ledgers cannot be said to be that of management consultancy.
Therefore the practicing chartered accountant can do only the above said activities under his professional capacity.
6.1 On the above reading of the extract from the chartered Accountants Act, it is clear 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. It is also seen from the records that the said three companies had outsourced the work to other private parties also who where not Chartered Accountants. Moreover, the fact of the matter is that the employees were not getting trained as Chartered Accountant under the Chartered Accountants Act. They were unskilled personal 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. Therefore, the order given by the Commissioner (A) in the service providers case, of which one of the order is extracted is a correct order and requires to be upheld Revenue appeals are rejected and the party's appeal in ST/209/2006 is allowed.
In view of the issue has been fully dealt with by this Bench in the cited Final Order in the assessee's favour, the citation referred to by the learned DR does not apply to the facts of the case. The prayer for referring the matter to the Larger Bench is not sustainable as there is no contra judgments to refer the issue to the Larger Bench. The Revenue has not appealed against the earlier order passed by this Bench. In view of this position, I do not find any merit in the Revenue's appeals and the same are rejected.