S. S. GARG

The present appeal is directed against the impugned order dated 19.02.2018 passed by the Commissioner (Appeals) CGST & Central Excise - Surat whereby the Learned Commissioner (Appeals) has upheld the Order-In-Original and rejected the appeal of the appellant.

2. Briefly the facts of the present case are that the appellant is engaged in the manufacturing of excisable goods i.e compressed asbestos fiber jointing, asbestos free compressed jointing falling under Chapter heading 68 & 84 of the CETA, 1985. The records of the appellant was audited by the department and it was noticed by the department that appellant had paid the performance commission & perquisite fee other than salary but had not discharged the service tax liability on the said services. The department entertained the view that the appellant is liable to pay service tax on such fee and commission under reverse charge under Notification No. 30/2012 dated 20.06.2012 as amended vide notification No. 45/2012 dated 07.08.2012 i.e. the services provided or agreed to be provided by a Director of a company to the said company was notified as a taxable service.

2.1 On this allegation, a show cause notice dated 25.09.2014 was issued demanding the service tax amounting to Rs. 11,12,400/- under Section 73(1) of the Finance Act, 1994 along with applicable interest under Section 75 of the Finance Act, 1994 and penalties under Section 77(1)(a), 77(1)(b), 70 and 78 of the Finance Act, 1994.

2.2 After following the due process, the adjudicating authority confirmed the demand of service tax, interest and penalty. Aggrieved by the said order, appellant filed appeal before the Commissioner who rejected the same, hence, the present appeal.

3. Heard both the parties and perused the material on record.

4. Learned Counsel appearing on behalf of the appellant submits that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law and the binding judicial Precedents. He further submits that entire demand is raised on basic misconception of law, namely any remuneration paid by a company to its director beyond fixed monthly salary, must necessarily be regarded as consideration for an independent taxable service. He further submits that this premise is ex-facie contrary to Section 17(1) of the Income Tax Act, 1961 which expressly includes within the meaning of salary “fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages”. He further submits that appellant has produced statutory and corporate records and the Board Resolutions which clearly provides that individuals were appointed as working/whole-time directors and the remuneration payable to them in such capacity is subject to deduction of TDS.

4.1 He further submits that Form-16 certificates issued to them and TDS deposited under the salary mechanism constitute statutory evidence that the payment were treated as salary under the Income Tax Act. He also submits that as per Section 65B(44)(b) of the Finance Act, 1994 excludes from the definition of “service” any provision of service by an employee to the employer in the course of or in relation to employment. The exclusion is absolute and once the relationship between the company and the concerned directors is found to be one of employer and employee, the charging provisions under the Finance Act, 1994 do not get attracted at all. He also submits that the reverse charge notification cannot expand the charging section or nullify the statutory exclusion. He further submits that this issue is no more res integra and has been settled by the various decisions by the Tribunal and the High Court and Supreme Court. In support of his submission, he has relied upon the following decisions.:-

• Ratnamani Metals and Tubes Vs CCE & ST. Ahmedabad- (2025) 34 Centax 34 (Tri-Ahmd)

• Sulphur Mills Ltd Vs. CCE & ST, Vadodara - II (2024) 25 Centax 385 (Tri. Ahmd)

• Maithan Alloys Ltd Vs. CCE & S.T., Bo