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2020 (11) TMI 622 - AT - Service TaxTaxable Service or not - payment of remuneration in the nature and form of commission based on percentage of profit to whole time directors - reverse charge mechanism (RCM) - demand of service tax on fixed part as well as the variable pay - benefit of N/N. 30/2012-S.T., dated 20th June 2012 - It is the case of the Department that the said remuneration paid to the Directors would constitute ‘service’ liable to service tax in the hands of appellant assessee under reverse charge mechanism - HELD THAT:- Section 2(94) of Companies Act, 2013, duly defines ‘whole-time director’ to include a director in the whole-time employment of the company. A whole-time Director refers to a Director who has been in employment of the company on a full-time basis and is also entitled to receive remuneration. The certificate issued by the company secretory states that the remuneration is given in various form as allowed under the Companies act, 2013. The whole-time Director is essentially an employee of the Company and accordingly, whatever remuneration is being paid in conformity with the provisions of the Companies Act, is pursuant to employer-employee relationship and the mere fact that the whole-time Director is compensated by way of variable pay will not in any manner alter or dilute the position of employer-employee status between the company assessee and the whole-time Director - thus, when the very provisions of the Companies Act make whole-time director (as also in capacity of key managerial personnel) responsible for any default/offences, it leads to the conclusion that those directors are employees of the assessee company. Since demand of service tax is set aside, penalty and interest are also not sustainable. Appeal allowed - decided in favor of appellant.
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