The Bombay High Court has quashed an Order-in-Original and a subsequent recovery notice issued against an individual advocate, ruling that services provided by an advocate to a partnership firm of advocates are exempt from service tax.
The Division Bench of Justice G. S. Kulkarni and Justice Aarti Sathe, in the case of Manisha Rajiv Shroff v. The Union of India & Ors., held that the Designated Officer acted without jurisdiction and contrary to binding notifications issued by the Ministry of Finance.
Background of the Case
The petitioner, Manisha Rajiv Shroff, is an advocate registered with the Bar Council of Maharashtra and Goa since February 5, 2007. The dispute arose following a Show Cause Notice issued on October 27, 2021, which alleged a mismatch between the petitioner’s Income Tax Returns (ITR)/Tax Deducted at Source (TDS) data and Service Tax-3 returns for the period 2016-17. The department claimed the petitioner had not correctly discharged her service tax liability, resulting in an alleged evasion.
According to the petitioner, the Show Cause Notice and subsequent notices for three personal hearings were dispatched to her old address and were never received. Consequently, an Order-in-Original was passed on March 15, 2023, confirming a service tax liability of Rs. 26,81,250, along with interest and penalty.
Following this order, the department issued a recovery notice on October 31, 2025. A lien was created on the petitioner’s ICICI Bank account on November 3, 2025, without notice. Furthermore, on December 21, 2025, the petitioner discovered that her Axis Bank account had been frozen. The petitioner subsequently approached the High Court under Article 226 of the Constitution.
Arguments of the Parties
The petitioner, represented by Advocates Mr. Mihir Gupte, Mr. Mayank Jain, and Ms. Pallavi Singh, contended that service tax is not leviable on services provided by an advocate to a partnership firm of advocates. The petitioner relied on:
- Notification No. 25/2012-ST (dated June 20, 2012)
- Notification No. 30/2012-ST (dated June 20, 2012)
The petitioner argued that:
- Exemption: Legal services provided by an individual advocate or a partnership firm of advocates to another advocate or partnership firm of advocates are exempt from the levy of service tax.
- Reverse Charge: Alternatively, services provided by an advocate are taxable under the Reverse Charge Mechanism, shifting the liability to the service recipient (business entity), not the advocate.
- Natural Justice: The principles of natural justice were violated as the notices were sent to an old address, leading to an ex-parte order.
The Respondent (Union of India) was represented by Mr. Jitendra B. Mishra.
Court’s Analysis and Observations
The Bench observed that the genesis of the action was the verification of third-party data by the Income Tax Department. However, the Court noted that the core issue was strictly covered by the exemption notifications.
The High Court accepted that the proceedings were covered by the earlier decision of the Bombay High Court in Advocate Pooja Patil Vs. Deputy Commissioner, CGST And CX Division VI [2024(15) Centax 124(Bom.)].
In the Pooja Patil case, the Court had analyzed Notification No. 25/2012-ST, specifically Entry 6(b), which exempts services provided by an individual as an advocate or a partnership firm of advocates by way of legal services to an advocate or partnership firm of advocates. The Court also referred to Notification No. 30/2012-ST, which specifies that for services provided by an individual advocate or a firm of advocates, the percentage of service tax payable by the provider is “Nil” (with 100% payable by the recipient under Reverse Charge).
Quoting the Pooja Patil judgment, the Bench observed:
“In our opinion, what is more fundamental is that the Designated Officer although was pointed out that he would not have jurisdiction to take forward the proceedings, inasmuch as service tax was not leviable on the individual advocate, as per the provisions of notification(s) as noted above, such contention has not been considered by the Designated Officer in passing the impugned order.”
The Court held that the Designated Officer had “acted without jurisdiction” by passing an order that was “patently contrary to the notifications dated 20th June 2012.”
Decision
The High Court ruled that the present proceedings stood covered by the said notifications and the law laid down in the Advocate Pooja Patil case.
Consequently, the Court allowed the petition with the following directions:
- Quashed and Set Aside: The Order-In-Original No. SG-83/DC/MSH/DIV-V/2023 dated March 15, 2023.
- Recovery Cancelled: Directed the respondents to withdraw, revoke, and cancel the Recovery Notice dated October 31, 2025.
- Show Cause Notice Quashed: Quashed the Show Cause Notice dated October 27, 2021.
No order as to costs was passed.
Case Details:
- Case Title: Manisha Rajiv Shroff v. The Union of India & Ors.
- Case No: Writ Petition (L) No. 1684 of 2026
- Coram: Justice G. S. Kulkarni & Justice Aarti Sathe
- Counsel for Petitioner: Mr. Mihir Gupte, Mr. Mayank Jain, and Ms. Pallavi Singh
- Counsel for Respondents: Mr. Jitendra B. Mishra with Sangeeta Yadav, Mr. Rupesh Dubey (UOI); Ms. Shruti Vyas with Niyati Mankad (State)
