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TMI Blog2024 (6) TMI 1413X X X X Extracts X X X X X X X X Extracts X X X X ..... ade to the directors and form 16 was issued. Therefore, the said remuneration which was paid under the head of salary would not attract Service Tax he placed Reliance on various following Judgments and board circulars:- * Allied Blenders and Distillers Pvt Ltd Vs. C.C.E & S.T. Aurangabad - 2019 (24) G.S.T.L. 207 (Tri.-Mumbai) * Vectus Industries Ltd Vs. Commissioner of Service Tax - Final Order No. 71942/2019 dated 26.11.2019 of the CESTAT, Allahabad * Maithan Alloys Ltd Vs. Commissioner of C.Ex. & S.T. Bolpur - 2020 (33) G.S.T.L. 228 (Tri.-Kolkata) * Bengal Beverages Pvt Ltd Vs. CGST & Excise, Howrah - Final Order No. 7556l / 2020 dated 09.10.2020 of the CESTAT, Kolkata 2.1. He further submits that in the above referred circular also board has clarified that remuneration such as paid in the present case not liable for Service Tax. Therefore, the issue no longer res integra accordingly the impugned orders are not sustainable. 3. Shri Rajesh R Kurup, learned Superintendent (AR) appearing on behalf of the revenue reiterates the finding of the impugned order. 4. We have carefully considered the submission made by both sides and perused the records. We find that there is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of Article 366 of the Constitution, or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. 7. The appellants are taking shelter of clause (b) of the definition of 'service'. Advancing the arguments on behalf of the appellant, Ld. Advocate submits that since the relation between the appellant and the four Directors are in the nature of employer and employee hence, no Service Tax is payable by the appellant on the remuneration paid to these directors which is nothing but 'salary' being paid to an employee. 8. The Ld. Advocate for the appellant referring to various provisions of the Companies Act vehemently argued that these four directors were appointed as full-time/whole time directors of the company, in accordance with the Articles of association and as per resolutions of the Board of Directors (BOD). Under various provisions of the Companies Act, these directors are treated as em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Director also. 10. We find that the appellant have placed on record the Form-16 issued by the appellant indicating deduction of income tax at source on the salary paid to each of the Directors. Besides, the appellant had also produced the contribution made to the Employees Provident Fund for each of the Directors, as required in case of other employees under the relevant laws. The statement furnished for all the employees by the Appellant reflects the name of the directors also. Copy EPF Return showing the name Mr. K.R. Chhabria in the list of employees is as below : 11. Similarly, the Form-32 as required to be filed under the Companies Act, with the Registrar of companies, the four directors are shown as executive directors indicating that they are employees of the company. 12. Both sides heavily relied on the judgment of the Hon'ble Supreme Court in the case of Ram Pershad v. CIT, New Delhi - (1972) 2 SCC 696 delivered under the Income Tax Act. In the said case, the assessee and his wife owned a large number of shares in a private limited company engaged in the business of running hotels. By an agreement with the company, the assessee was to receive Rs. 2,000/- per mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for his employer. If he is to take the employer or any other person at his request from place 'A' to place 'B' the employer does not supervise the manner in which he drives between those places. Such examples can be multiplied. A person who is engaged to manage a business may be a servant or an agent according to the nature of his service and the authority of his employment. Generally it may be possible to say that the greater the amount of direct control over the person employed, the stronger the conclusion in favour of his being a servant. Similarly the greater the degree of independence the greater the possibility of the services rendered being in the nature of principal and agent. It is not possible to lay down any precise rule of law to distinguish one kind of employment from the other. The nature of the particular business and the nature of the duties of the employee will require to be considered in each case in order to arrive at a conclusion as to whether the person employed is a servant or an agent. In each case the principle for ascertainment remains the same." Analyzing the facts in issue and applying the said tests their Lordships further observed as : "14. A peru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le A which enjoins that the business of the company shall be managed by the directors is deemed to be continued in the articles of association of the company in identical term or to the same effect. Since the Board of Directors are to manage the business of the Company they have every right to control and supervise the assessee's work whenever they deem it necessary. Every power which is given to the Managing Director therefore emanates from the articles of association which prescribes the limits of the exercise of that power. The powers of the assessee have to be exercised within the terms and limitations prescribed thereunder and subject to the control and supervision of the Directors which in our view is indicative of his being employed as a servant of the company." (emphasis supplied) 13. The Learned Advocate submits that the Board of Directors exercises control which includes removal of the Director from the post and there may not be a strict day to day supervision of the work of the Director, but the employment of the Directors continue till the Board of Directors desired to do so. It is his contention that the officer of a company as per Sec. 2(60) of the Companies Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 that the Directors, who were employee of the appellant received amount which cannot be said as ' salary' but fees paid for being Director of the company. The Income Tax authorities also assessed the remuneration paid to the said directors as salary, a fact cannot be ignored. The judgments cited by the revenue cannot be applied to the present case as the facts are different and the finding of Income tax authorities accordingly also different in the said case. 17. In these circumstances, we do not find merit in the impugned order. Consequently, the impugned order is set aside and the appeal is allowed." On the identical issue this Tribunal following above decision in the case of Supreme Treves Private Limited (Supra) also held that similar remuneration paid to the directors are not liable to Service Tax and demand was set aside and appeal was allowed. In the recent decision by these Tribunal in the case Omari India Private Limited Vs. CCE & ST - Vadodara-I 2024 (1) TMI 982 CESTATE-Ahmedabad also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions'. The said amount paid by a company to their Managing Director/Directors (Whole-time or Independent) even if termed as commission, is not the 'commission' that is within the scope of business auxiliary service and hence service tax would not be leviable on such amount. (ii) The Managing Director/Directors (Whole-time or Independent) being part of Board of Directors perform management function and they do not perform consultancy or advisory function. The definition of management consultant service makes it clear that what is envisaged from a consultant is advisory service and not the actual performance of the management function. The payments made by Companies, to Directors cannot be termed as payments for providing management consultancy service. Therefore, it is clarified that the amount paid to Directors (Whole-time or Independent) is not chargeable to service tax under the category 'Management Consultancy service. However, in case such directors provide any advice or consultancy to the company, for which they are being compensated separately, such service would become chargeable to service tax 3. In view of the above, it is clarified that remuneration ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eration is regarding the eligibility of credit on service tax paid on Director Sitting Fees. The said issue is covered by the decision in the case of SKN Organics P. Ltd. (supra). Further, it is also to be stated that it is the duty of the director to attend the meetings and therefore the service tax paid on such fees is eligible for credit. 7. From the discussions made above, I am of the view that the disallowance of credit on the impugned services is incorrect and requires to be set aside, which I hereby do. The impugned order is set aside and the appeal is allowed with consequential relief, if any." In view of the above discussions and findings, we are of the view that the appellant is legally entitled the Cenvat credit in respect of the Service Tax paid on commission paid to the directors. 5. Accordingly, the impugned order is set aside. Appeal is allowed. As regards the decision of Brahma alloyed Limited relied upon by the learned AR, We find that firstly the said decision is of single member bench, secondly, various division benches have taken a view contrary to the decision of Brahma alloyed limited. Therefore, Brahma Alloy Limited case is not good law and the same is ..... X X X X Extracts X X X X X X X X Extracts X X X X
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