2023 (12) TMI 748 - AT - Service Tax

Demand of service tax - nature of activity - notice pay recovered from the ex-employee - HELD THAT - It is observed that the only issue in the impugned order is the taxability about the amount as has been received by the employer from its employees at the time of pre-mature termination of the contract of the employment. The issues stand already decided by this Tribunal, Principal Bench M/S RAJASTHAN RAJYA VIDHYUT PRASARAN NIGAM LTD. VERSUS COMMISSIONER OF CENTRAL GOODS AND SERVICES TAX, CUSTOMS AND CENTRAL EXCISE, JODHPUR I 2022 (1) TMI 909 - CESTAT NEW DELHI , this Tribunal held compensation for failure under a cannot is NOT consideration for service under the contract and also following the law laid down by Madras High Court in GE T D that Notice pay, in lieu of termination, however, does not give rise to the rendition of service either by the employer or the employee, the impugned order upholding confirmation of a demand of service tax on the notice pay received/recovered by the appellant from its employees for premature resignation cannot be sustained. The issue involved in the present appeal is found to be exactly same which stands already decided in the above manner - there are no reason to differ with those findings - impugned order set aside - appeal allowed.

Summary

Issues Involved:
The issues involved in the present appeal are non-payment of service tax on revenue share deducted by the hospital from consulting doctor's fee, fee for service plan, and non-payment of service tax on notice pay recovered from ex-employees.

Non-payment of Service Tax on Revenue Share:
The appellant, registered with the Service Tax Commissionerate, Delhi, for providing taxable services through a hospital, challenged an order proposing duty demand for non-payment of service tax on revenue share deducted from consulting doctor's fee. The Adjudicating Authority dropped a major amount of the demand related to revenue sharing agreement but confirmed a demand for notice pay received by the appellant. The appellant contended that the notice pay collected from employees does not amount to the provision of service. The Tribunal referred to previous decisions and held that compensation for premature termination of employment is not consideration for service under the contract, thus setting aside the demand for service tax on notice pay.

Conclusion:
The Tribunal found that the issue of taxability of notice pay received from employees upon premature termination of employment had already been decided in previous cases. Following the legal principles established in those cases, the Tribunal set aside the order confirming the demand for service tax on notice pay, as it does not give rise to the rendition of service either by the employer or the employee. Consequently, the appeal was allowed.