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TMI Blog2024 (9) TMI 1549X X X X Extracts X X X X X X X X Extracts X X X X ..... the same was deducted under the same head. He submits that the commission paid to the Directors is percentage of profit of the Company. He submits that the issue is no longer res-integra not only on the basis of various judgments but also as per the Board Circular dated 31.07.2009. He placed reliance on the following judgments and Board Circular:- (a) Board Circular No. 115/9/2009-S.T., dated 31-7-2009 (b) Bengal Beverages Pvt. Ltd. vs. CGST & Excise, Howrah-2020 (11) TMI 622 - CESTAT Kolkata (c) Gujarat Guardian Ltd. vs. CCE-Bharuch-2024 (2) TMI 910 - CESTAT Ahmedabad (d) Ratnamani Metals And Tubes Ltd. vs. CCE-Ahmedabad-III-2024 (3) TMI 10 CESTAT Ahmedabad (e) Maithan Alloys Ltd. vs. CCE, Bolpur- 2019 (4) TMI 1595 CESTAT Kolkata (f) Allied Blenders And Distillers Pvt. Ltd. vs. CCE-2019 (1) TMI 433 CESTAT Mumbai (g) Supreme Treves Pvt. Ltd. vs. CCE, Daman-2024 (1) TMI 935 - CESTAT Ahmedabad (h) Oil and Natural Gas Corporation Ltd. vs. CCE-(2024) 20 Centax 589 (Tri.-Del) (i) NRB Industrial Bearings Pvt. Ltd. vs. CCE, Aurangabad-2019 (8) TMI 600 CESTAT Mumbai (j) CCE, Rangareddy-GST vs. Granules India Ltd.-2024 (4) TMI 9- CESTAT Hyderabad. 3. Shri Rajesh K Agarw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t) by the company, (ii) applicability of service tax on Independent Directors who are part of the Board of Directors under 'Management Consultant service'. 2. Both the matters have been examined by the Board and the clarifications are as under, - (i) Some Companies make payments to Managing Director/Directors (Whole-time or Independent), terming the same as 'Commissions'. The said amount paid by a company to their Managing Director/Directors (Whole-time or Independent) even if termed as commission, is not the 'commission' that is within the scope of business auxiliary service and hence service tax would not be leviable on such amount. (ii) The Managing Director / Directors (Whole-time or Independent) being part of Board of Directors perform management function and they do not perform consultancy or advisory function. The definition of management consultant service makes it clear that what is envisaged from a consultant is advisory service and not the actual performance of the management function. The payments made by Companies, to Directors cannot be termed as payments for providing management consultancy service. Therefore, it is clarified that the amount paid to Directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing paid in conformity with the provisions of the Companies Act, is pursuant to employer-employee relationship and the mere fact that the whole-time Director is compensated by way of variable pay will not in any manner alter or dilute the position of employer-employee status between the company assessee and the whole-time Director. We are thoroughly convinced that when the very provisions of the Companies Act make whole-time director (as also in capacity of key managerial personnel) responsible for any default/offences, it leads to the conclusion that those directors are employees of the assessee company. 9. Further, the judgment of this Tribunal in the case of MAITHAN ALLOYS LTD Versus COMMISSIONER OF C. EX. & S.T., BOLPUR (supra) is squarely applicable to the facts of the case. Further, the Ld. Adjudicating authority has also allowed part of the demand on the ground that there exists an employer-employee relationship between the whole time Directors and the appellant assessee, then the ground of confirming the balance demand that the directors have provided service to the company becomes infructuous and hence cannot survive before the eyes of the law. Since demand of servi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pra) is squarely applicable to the facts of the case. Further, the Ld. Adjudicating authority has also allowed part of the demand on the ground that there exists an employer-employee relationship between the whole time Directors and the appellant assessee, then the ground of confirming the balance demand that the directors have provided service to the company becomes infructuous and hence cannot survive before the eyes of the law. Since demand of service tax is set aside, penalty and interest are also not sustainable." Since, the facts and circumstance of the present case are akin to, the above mentioned decision of this Tribunal and therefore same is squarely applicable in the present case also. 5. Accordingly, we hold that impugned order-in-original is without any merit and we set aside the same. Thus the appeal is allowed." (c) In the case of Ratnamani Metals And Tubes Limited, this Tribunal has passed the following order:- "4. We have carefully considered the submissions made by both the parties and perused the records. We find that the issue involved in the present appeal is whether service tax should be levied on the remuneration paid by the Appellant to its directors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat those directors are employees of the assessee company. 9. Further, the judgment of this Tribunal in the case of MAITHAN ALLOYS LTD Versus COMMISSIONER OF C. EX. & S.T., BOLPUR (supra) is squarely applicable to the facts of the case. Further, the Ld. Adjudicating authority has also allowed part of the demand on the ground that there exists an employer-employee relationship between the whole time Directors and the appellant assessee, then the ground of confirming the balance demand that the directors have provided service to the company becomes infructuous and hence cannot survive before the eyes of the law. Since demand of service tax is set aside, penalty and interest are also not sustainable." In the case of Allied Blenders and Distillers Pvt. Limited vs. CCE&ST, Aurangabad reported at 2019 (24) GSTL 207 (Tri. Mumbai), the Mumbai Bench of this Tribunal has made the following observations:- "5. The short issue involved in the present appeal for determination is whether remuneration paid to the Directors by the appellant is chargeable to Service Tax and the appellants are required to discharge Service Tax under reverse charge mechanism in accordance with Notifications No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n' as envisaged under Service tax category. The relevant portion has been produced below: "it is clarified that remunerations paid to Managing Director / Directors of companies whether whole-time or independent when being compensated for their performance as Managing Director/Directors would not be liable to service tax. 05. In view of the aforesaid discussions and findings, we are of the considered view that the directors of the Appellant are employees of the Appellant Company and following the judicial discipline on the similar issue, we hold that the impugned order is not sustainable, hence the same is set aside as it is without any merit. The appeal is allowed." (d) In the case of Maithan Alloys Limited, Kolkata bench of this Tribunal has passed the following order:- "5. Heard both sides and perused the appeal records. 6. In the instant case, it is not in dispute that service tax has been duly paid on remuneration paid to directors who are not whole time employee directors. The only dispute herein is for payment of remuneration to whole time directors, which is a fact on record. The provisions of Companies Act, 2013, contained in section 2(94), duly defines 'whole tim ..... X X X X Extracts X X X X X X X X Extracts X X X X
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