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The CESTAT allowed the appeal, holding that payments made to a full-time director constitute salary and are not subject to service tax under Management Consultancy Service. The appellant failed to produce documentary evidence such as salary slips or Form-16 to conclusively prove the nature of payment; however, reliance was placed on established precedent that remuneration to whole-time directors is exempt from service tax due to the employer-employee relationship. The appellant had paid the disputed tax and interest promptly after issuance of the show cause notice, and the tribunal accepted the advocate's assertion that the payments were part of the director's salary. Consequently, the demand of service tax on these payments was set aside.
The CESTAT allowed the appeal, holding that payments made to a full-time director constitute salary and are not subject to service tax under Management Consultancy Service. The appellant failed to produce documentary evidence such as salary slips or Form-16 to conclusively prove the nature of payment; however, reliance was placed on established precedent that remuneration to whole-time directors is exempt from service tax due to the employer-employee relationship. The appellant had paid the disputed tax and interest promptly after issuance of the show cause notice, and the tribunal accepted the advocate's assertion that the payments were part of the director's salary. Consequently, the demand of service tax on these payments was set aside.
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