Employment exclusion from service tax applies to whole-time directors paid salary, defeating reverse charge liability.

Remuneration paid to whole-time directors was outside service tax under reverse charge because the payments were made in the course of employment. The service definition under Section 65B(44) excludes services rendered by an employee to an employer in the course of or in relation to employment, and the records showed an employer-employee relationship: salary payment, tax deduction at source, Form 16 issuance, salary reflected in income tax returns, and Form 32 filing with the Registrar of Companies. On that basis, the directors' activities fell within the statutory exclusion and were not taxable under reverse charge.

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Issues: Whether remuneration paid to whole time directors in the course of employment was liable to service tax in the hands of the appellant under reverse charge mechanism.

Analysis: The definition of service under Section 65B(44) of the Finance Act, 1994 excludes service rendered by an employee to an employer in the course of or in relation to employment. The records showed that the whole time directors were appointed on salary, tax was deducted at source, Form 16 was issued, income tax returns reflected salary income, and Form 32 was filed with the Registrar of Companies. These circumstances established an employer-employee relationship, so the directors' activities fell within the statutory exclusion. The reasoning was consistent with the view taken in an identical matter involving remuneration paid as salary for day-to-day activities.

Conclusion: The remuneration paid to the whole time directors was not liable to service tax under reverse charge mechanism.

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