Allahabad High Court Grants Interim Relief To Anand And Anand, Stays Show Cause Notice Demanding Refund Of Rs.138 Crores

The Allahabad High Court has granted interim relief to Anand and Anand Law Firm by staying the proceedings initiated under the Goods and Service Tax Act, 2017.

The bench comprising of Chief Justice Pritinker Diwaker and Justice Ashutosh Srivastava stayed proceedings initiated pursuant to the show cause notice issued against the law firm till the next date of listing.

While dealing with foreign clients, Petitioner received convertible foreign exchange for legal services rendered to foreign client, on which the firm is entitled and availed export benefit as conferred by both Ministry of Commerce though Foreign Trade Policy and Ministry of Finance. It has been contended that at the time of granting refund, the department did not dispute the services provided by the firm are legal services and are export of services. However, the Department disputed that since the petitioner firm is not liable to pay tax on legal services, therefore, there is no output service, hence is not entitled for the refund of unutilized CENVAT credit for providing export of legal services.

However, in September, show cause notices were issued to the petitioner demanding that petitioner pay Rs. 11.71 crore which was allegedly erroneously refunded to the petitioner. Further, demand was raised for Rs. 138 crores on the legal services alleging that it is not an export of services.

The preliminary ground of challenge to the show cause notice was that the Department has no authority of to impose tax on lawyers and law firms as they are exempted from paying GST.

It was argued that the Delhi High Court had already ruled in favor of the petitioner for a different assessment period. Further, Delhi High Court has granted interim relief to the petitioner in a similar matter pertaining to another different tax period. It also stated that for a certain period, appeals had already been filed by the Department under Section 107 of the GST Act.

Placing reliance on the decision of the Delhi High Court, which was in favor of the petitioner, counsel for petitioner contended that in the service tax regime, the Department had raised the issue that since the petitioner firm is not liable to pay tax on legal services, therefore, there is no output service, which would make the firm entitled for refund of unutilized CENVAT credit for providing export of legal services. It was contended that this position as settled by the Delhi High Court was never challenged in appeal, therefore, it became binding. Since the nature of work of the petitioner did not change from service tax regime to the GST regime, no refunded was payable by the petitioner.

Advocates J.K. Mittal and Shubham Agrawal appeared for Anand and Anand.