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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 ..... Tax of Rs.2,29,036/- during the period 2014-15 and 2015-16 on an amount of Rs. 16,49,213/- recovered as 'notice period recovery' i.e. amount of salary and allowances deducted from an employee when an employee gives up the job without giving 3 months 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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yed to be allowed. 5. While rebutting the submissions, learned Departmental Representative has reiterated the findings arrived at by Commissioner (Appeals). It is mentioned that there appears no infirmity in the said order as the disputed amount is received 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 conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efined in Section 66E of the Act reading thus : 66E. Declared services. - The following shall constitute declared services, namely :- (a) renting of immovable property; (b) ********* (c) ********* (d) ********* (e) agreeing to the obligation to refrain from an act, or to tolerate an 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 imposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice and has merely facilitated the exit of the employee upon imposition of cost upon him for the sudden exit. Definition in clause (e) of Section 66E is not attracted to the scenario at hand. We hold that 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. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s: "2.9. Provision of service by an employee to the employer is outside the ambit of service. 2.9.3 Would amounts received by an employee from the employer on premature termination of contract of employment be chargeable to service tax? No. Such amounts paid by the employer to the employee for premature termination 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 Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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