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TMI Blog2023 (10) TMI 995X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rh, Raipur and it was felt that the appellant had short paid service tax to the extent of Rs. 72,33,994/- during the year 2008-2009 in respect of services received by it from foreign companies in the capacity of recipient of services. Similar short payments were noticed during the subsequent three financial years also. 3. Accordingly, a show cause notice dated 16.04.2014 was issued to the appellant demanding service tax of Rs. 3,31,55,802/- under the proviso to section 73 (1) of the Finance Act [The Act], 1994 along with interest under section 75. Penalties were proposed to be imposed under section 77 and 78 of the Finance Act. 4. After considering the appellant s reply by letters dated 22.12.2014 and 20.10.2016 and the submissions ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... asis. It is only contesting the demand of Rs. 9,45,494/- as service tax on the payments made to Pual Cerullo. It is the contention of the appellant that Pual Cerullo was an employee of the appellant and any payments made by an employer to an employee for the services of the employee do not form a taxable service as per the Finance Act. 8. Learned authorized representative also does not dispute this legal position. 9. In the impugned order, 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. Relevant paragraph 24 of the impugned order is reproduced below :- 24. As regards payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /01 Dated : 10th March 2011 To Mr. Pual M. Cerullo San Digo CA 91942 USA Sub. : Short closure of Assignment Contract. Ref. : Your Assignment Contract did 6th Aug 2009 and our letter No. Balco/Korba/HR/2011/PC/14340 dated 28th Feb 2011 and your reply dated 01st March 2011. Dear Mr. Cerullo, We are in receipt of your letter dated 01st March 2011 in response to our letter No. Balco/Korba/HR/2011/PC/14340 dated 28th February 2011. Since you have exercised option vide your letter dated 01st March 2011 to avail Pay in lieu of Notice period we agreed to your request. Please find enclosed a letter dated 7th March 2011 indicating details of full and final settlement on short closure of Assignment Contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ced 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. 13. The remaining amount of Rs. 6,24,074/- with interest is uncontested and needs to be upheld and we do so. 14. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tax must be established. In the absence of evidence of such an intent, no penalty under section 78 can be imposed. In this case, not only is there no evidence of such an intent but the entire payment is revenue neutral at the hands of the appellant. The services, in question on which the appellant had short paid the service tax were its input services and the appellant would have been entitled to take Cenvat credit of the entire amount of service tax immediately after paying such tax. In other words, the appellant had to pay with one hand and could take credit with the other. Such being the case, it is unthinkable that the appellant would have had an intention to evade payment of service tax because by not paying such service tax the appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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