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2024 (12) TMI 605 - AT - Service TaxLevy of service tax - commission paid by the appellant company to its Managing Director and Executive Director in addition to their salary - reverse charge mechanism as per Sr. No.5A of N/N. 30/2012-ST dated 20.06.2012 as amended by the N/N. 45/2012 dated 07.08.2012 - HELD THAT - The issue involved in the present case that whether the commission paid to the Directors are liable to service tax under reverse charge mechanism in the hands of the appellant has been settled in the appellant s own case SULPHUR MILLS LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE ST, VADODARA-II 2024 (9) TMI 1549 - CESTAT AHMEDABAD held that ' it is settled beyond any doubt that the commission paid to the Directors by the Company does not fall under the service as Business Auxiliary Service accordingly, not liable to service tax. Therefore, impugned order is set-aside and the appeal is allowed.' In view of the above order and also the decisions in the other cases cited by the Learned Counsel, the issue is no more under dispute and stands decided in favour of the assessee - the impugned order is set aside - appeal allowed.
Issues Involved:
1. Whether the commission paid to the Managing Director and Executive Director in addition to their salary is liable to service tax under the reverse charge mechanism as per the relevant notifications. Issue-wise Detailed Analysis: 1. Liability of Service Tax on Commission Paid to Directors: The primary issue in this case is whether the commission paid by the appellant company to its Managing Director and Executive Director, in addition to their salary, is subject to service tax under the reverse charge mechanism as per Notification No. 30/2012-ST, amended by Notification No. 45/2012. The appellant argued that this issue is not res-integra, citing several judgments, including a previous decision in the appellant's own case. The tribunal examined whether the service provided by the directors as employees to the employer falls under the definition of "service" as per Section 65B(44) of the Finance Act, 1994. The tribunal noted that the provision of service by an employee to the employer in the course of or in relation to employment does not constitute a "service" under the Act. The directors were considered employees of the company, and the commission paid was part of their employment remuneration. This was supported by the fact that the payment was recorded as salary in the company's books and accepted by the Income Tax Department, with TDS deducted under the salary head. The tribunal also referred to CBEC Circular No. 115/9/2009-ST, which clarified that payments made to directors, even if termed as commission, do not fall within the scope of business auxiliary service and are not subject to service tax. The circular further clarified that directors performing management functions, rather than consultancy or advisory functions, are not providing a taxable service. Several judgments were cited to support the appellant's position, including cases where tribunals held that remuneration paid to whole-time directors, even if in the form of commission, is pursuant to an employer-employee relationship and not subject to service tax. The tribunal consistently found that whole-time directors are employees of the company, and payments to them are in the nature of salaries, not taxable services. In conclusion, the tribunal determined that the commission paid to the directors does not fall under the definition of service as per the Finance Act, 1994, and is not liable to service tax. The impugned order was set aside, and the appeal was allowed, reinforcing the position that such commission payments are not taxable under the service tax regime.
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