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TMI Blog2024 (5) TMI 368X X X X Extracts X X X X X X X X Extracts X X X X ..... 66E is not attracted to the scenario at hand. The employer has not 'tolerated' any act of the employee but has permitted a sudden exit upon being compensated by the employee in this regard in form of Notice pay, in lieu of sudden termination. In any case this act however, does not give rise to the rendition of service either by the employer or employee. The decision relied upon by the appellant the Principal Bench in 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] is perused wherein it has been held 'compensation for failure under a cannot is NOT consideration for service under the contract and als ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s prior notice. The department was of the opinion that the said amount is towards agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act. It has been alleged that the said amount has been received pursuant to rendering the Declared Service as defined under 66E(e) of the Acts, the amount being the forfeited amount. The Service tax was also proposed to be recovered under reverse charge mechanism on Renting of Immovable Property Service by virtue of 68(2) of Finance Act on an amount received by the appellant from its whole time Directors in the given period. 2. With these observations, the demand of Service Tax for an amount of Rs.7,23,026/- (Rs. 4,93,990/- + Rs. 2,29,036/- ) was proposed to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ved for rendering the declared service of agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act . Appeal is therefore, prayed to be dismissed. 6. Having heard both the parties and perusing the record, we observe that the demand in question has been confirmed by Commissioner (Appeals) after having the following observations: (i) One of the ingredients for the service tax payment is that an activity should have been provided for a consideration. Where the employees pays for such services or where the amount is deducted from the salary or a portion of the salary foregone by the employee, such activity will also be considered as having been made for a consideration and thus is liable for tax. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... act or a situation, or to do an act; 9. According to the Revenue, amount in question is in lieu of notice hence constitutes payment to an employee by the employer for the notice period or vice versa where the employer/employee desires an immediate exit from the organization 10. In our view, the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit. The definition in Clause (e) of Section 66E as extracted above is not attracted. In our considered view, the employer has not tolerated any act of the employee but has permitted a sudden exit upon being compensated by the employee in this regard. The provis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n being compensated by the employee in this regard in form of Notice pay, in lieu of sudden termination. In any case this act however, does not give rise to the rendition of service either by the employer or employee. 12. We have also perused the decision relied upon by the appellant the Principal Bench in Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. (supra) wherein it has been held as follows: 15. The present case deals with contracts of employment. Employment contracts are entered into with the expectation that the employer will continue to keep him employed for the period as agreed and that the employee will perform his duties diligently. They are not entered into so that the employer can remove the employer from service or so that the em ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of a contract of employment are treatable as amounts paid in relation to services provided by the employee to the employer in the course of employment. Hence, amounts so paid would not be chargeable to service tax. However any amount paid for not joining a competing business would be liable to be taxed being paid for providing the service of forbearance to act. 17. Referring to the above clarification by the CBEC, High Court of Madras has, in GE T D India Ltd. held that notice pay, in lieu of sudden termination, does not give rise to the rendition of service either by the employer or the employee and allowed the writ petitions. Thus, the specific issue in this case is no longer res integra. GE T D India Ltd. was followed in Intas Pharm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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