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2023 (10) TMI 995 - CESTAT NEW DELHINature of services - Professional services or existence of employee / employer relationship - services received by it from foreign companies in the capacity of recipient of services - demand of service tax alongwith interest and penalties u/s 77 and 78 of FA. The Principal Commissioner confirmed the demand of service tax on the amount paid to Pual Cerullo for the reason that the appellant had not submitted evidence to substantiate that Pual was its employee. HELD THAT:- The matter need not be remanded as it is evident from the impugned order that the only reason the Principal Commissioner confirmed the demand on the payment made to Pual is that the employment contract and other evidence were not produced before him. The letters of appointment and the termination letter produced before us make it amply clear that Pual was appointed as the Chief Operating Officer. Therefore, the relationship between the appellant and Pual was that of an employer and employee. It is undisputed that the services rendered by an employee to its employer are out of the ambit of service tax. The demand of service tax, therefore, needs to be set aside to the extent of Rs. 9,45,494/- on this count - The remaining amount of Rs. 6,24,074/- with interest is uncontested and needs to be upheld. Penalty u/s 77 of FA - HELD THAT:- The penalty under section 77 of Rs. 10,000/- was imposed for the reason that the appellant had not correctly reflected the total amount of service tax due from it. This fact is evident as an amount of Rs. 6,24,074/- was admittedly short paid by the appellant. Penalty upheld. Penalty u/s 78 of FA - HELD THAT:- The appellant does not have an intention to evade payment of service tax because by not paying such service tax the appellant would gain nothing - the imposition of penalty under section 78 of the Finance Act cannot be sustained and needs to be set aside. Appeal allowed in part.
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