TMI Blog2020 (11) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... y. 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 - thu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ors which has fixed as well as variable component. The said variable component comprised of commission payable on the basis of percentage of profit in conformity with the provisions of the Companies Act. The Department has raised a demand of service tax under reverse charge mechanism on the entire remuneration paid to the whole-time Directors i.e. the fixed part as well as the variable pay, in terms of Notification No.30/2012-S.T., dated 20th June 2012, as amended. 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. 3. Shri Ankit Kanodia, Ld. Chartered Accountant, appeared on behalf of the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he balance demand on the ground that the Directors have provided services to the Appellant company cannot survive, as it is contradictory and unreasonable. The Ld. CA also submitted that the very definition of service under Section 65B(44) of the Finance Act, 1994, excludes the services rendered by an employee to the employer, from the levy of service tax. In support of his submissions, he relied upon the decision of this Tribunal in the case of MAITHAN ALLOYS LTD. versus COMMISSIONER OF C. EX. S.T., BOLPUR reported in 2020 (33) G.S.T.L. 228 (Tri.-Kolkata) wherein it was held that - 7. Further, in the present case, the appellant has duly deducted tax under Section 192 of the Income-tax Act which is the applicable provisions for TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence set aside. Since demand of service tax is set aside, penalty and interest are also not sustainable. 4. He also relies upon the judgment of the ALLIED BLENDERS AND DISTILLERS PVT. LTD. versus C.C.E. S.T., AURANGABAD reported in 2019 (24) G.S.T.L. 207 (Tri.-Mumbai) wherein it was held by the Tribunal - 16. Also, from the documents produced by the appellant it is crystal clear that the Directors who are concerned with the management of the company, were declared to all statutory authorities as employees of the company and complied with the provisions of the respective Acts, Rules and Regulations indicating the Director as an employee of the company. No contrary evidence has been brought on record by the Revenue to show th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no penalty is imposable. 6. The Ld. Departmental Representative (DR), Shri K.Chowdhury, while supporting the impugned order passed by the Commissioner, reiterated the findings made therein. He stated that since the Directors are paid a variable amount based on the percentage of profit though approved by the Company s Board, it cannot be said to have constituted the employer-employee relationship, despite the fact that they are whole-time Directors. He accordingly prayed for confirming the entire service tax demand. 7. Heard both sides and perused the appeal records. 8. In the instant case, the only dispute herein is for payment of remuneration in the nature and form of commission based on percentage of profit to whole time directo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny default/offences, it leads to the conclusion that those directors are employees of the assessee company. 9. Further, the judgment of this Tribunal in the case of MAITHAN ALLOYS LTD Versus COMMISSIONER OF C. EX. S.T., BOLPUR (supra) is squarely applicable to the facts of the case. Further, the Ld. Adjudicating authority has also allowed part of the demand on the ground that there exists an employer-employee relationship between the whole time Directors and the appellant assessee, then the ground of confirming the balance demand that the directors have provided service to the company becomes infructuous and hence cannot survive before the eyes of the law. Since demand of service tax is set aside, penalty and interest are also not sust ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
