Advocates are up in arms against the recent amendment brought to the Finance Act of 1994 by the Union government, under which the representation by an advocate before any court, tribunal or authority and advisory services provided by lawyers are sought to be subject to levy of service tax.

However, the smiles soon came back with the Madras high court on February 6 passing an interim order restraining the Union government from collecting service tax from members of the Madras high court advocates association (MHAA), which had, through its president, G. Mohanakrishnan, challenged the constitutional validity of the amendment.

Service tax was introduced in India by the Finance Act, 1994, and was levied on stock broking service, telecommunication service and general insurance service. It has since been extended to various other services. Through the Finance Act, 2011, an amendment was made in Section 65 (105) (zzzzm) to levy service tax on representation provided by an advocate.

The practice of law includes tendering service and court representation, said Mohanakrishnan. However, the practice of law, unlike what are conventionally referred to as ‘services’, facilitates the observance and promotion of ‘the rule of law’ which was the foundation of constitutional governance and part of the basic structure of the constitution, he pointed out.

It has another constitutional dimension, which differentiates it from the other services. The assistance of a lawyer is a constitutional and legal right that citizens and even non-citizens are entitled to in India.
A tax on a constitutional guarantee is anathema to the constitutional scheme and can never have been envisaged by the framers of the Constitution, he said.

Mohanakrishnan said P. Chidambaram, the finance minister in 2004-08, accepted on the floor of the House that a lawyer gives advice and is not a service provider who can be brought within the service tax net.

“An advocate does not render service. He renders assistance to his client and to courts. He is an officer of the court and is hence accountable to the court. Mere fact that a consideration flows from a business entity cannot alter the role of the advocate,” he said.

The levy of service tax, which imposes a heavy additional burden on litigants, severely impedes their ability to have access to the system of administration and delivery of justice, which is a basic and fundamental right guaranteed under the Constitution, Mohanakrishan said.

It is anomalous that, while on the one hand the central government repeatedly voices pious platitudes about improving, expanding and liberalising the access to justice delivery system, at the same time it has imposed service tax on representation by advocates that will severely limit access to the justice delivery system, he said.

“An advocate is the officer of the court. It is for this reason that the fees received by an advocate are regarded as a mere honorarium and not as a matter of contractual right,” Mohanakrishnan said.

“It is for this reason that it has been held by the Supreme Court that an advocate cannot exercise any right of lien over his clients’ paper and documents, which are lying with him, for compelling the client to pay the advocate’s fees,” he said.