TaxTMI 
TaxTMI 
2024 (1) TMI 935
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....rtment has erred in interpreting the word „remuneration‟ which is paid by the appellant to its Directors in a literally meaning. The amount being paid by the appellant to its Directors is nothing but a salary for all practical purposes. It has also been contended that it is pertinent to note that TDS on such salaries received by various employees including its Directors has duly been deducted and the same is being regularly deposited with the Income Tax department. The learned Advocate has mentioned that the matter has been decided in catena of judgments where it has been held that the remuneration paid to the Directors is nothing but a salary. The Directors which are appointed as per the statutory requirements are employees of the Company. The learned Advocate has relied upon the decision of this Tribunal in the case of Allied Blenders and Distillers Pvt. Limited vs. CCE & ST, Aurangabad reported in - 2019 (24) GSTL 207 (Tri. Mumbai.) and Rent Works India Pvt. Limited vs. CCE, Mumbai reported in 2016 (43) STR 634 (Tri. Mumbai). 4. Learned Advocate has also drawn our attention to this bench‟s decision vide Final Order No. A/11891-11892/2021 dated 24.05.2021 where....
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....n given by the Hon‟ble High Court:- "In the instant case also, we notice that the approach of the Tribunal is to abdicate its duty of deciding the matter on the merits or to retain the matter till the outcome of the pending matter before the apex court. This approach of tribunal is not proper. We deem it appropriate to direct the tribunal to decide the matter on merits. We further reserve liberty to the parties to raise all contentions as raised by both the sides before this Court. Let the same be decided without further loss of time." 6. The matter has been heard in detail. We find that the short issue involved in the present appeals is that whether the remuneration paid to the Directors by the appellant is chargeable to service tax under reverse charge basis or not. We find that the matter is no longer res-integra as the same has already been decided by this Tribunal. The Kolkata Bench of this Tribunal, in the case of Bengal Beverages Pvt. Limited vs. CGST & Excise, Howrah reported in 2020 (11) TMI 622- CESTAT Kolkata has passed the following order:- "8. In the instant case, the only dispute herein is for payment of remuneration in the nature and form of commission ba....
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....reported at 2019 (24) GSTL 207 (Tri. Mumbai), the Mumbai Bench of this Tribunal passed the following order:- "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. 45/2012-S.T., dated 7-8-2012 and 46/2012-S.T., dated 7-8-2012. Revenue's allegation is that the Directors namely, Shri K.R. Chhabria, Shri U.K. Ganguli, Shri Deepak Roy and Shri Jitendra Hemdev, who were paid remuneration during the period July, 2012 to March, 2015 amounting to Rs. 1,01,02,55,057/- by the appellant, Service Tax of Rs. 12,48,67,525/- was required to be discharged by the appellant. Opposing the said contention of the Revenue, the appellant has argued that the amount paid to the said Directors are in the nature of the salary paid to them, since the said Directors are whole time directors and employees of the company, accordingly, it is not a 'service' within the definition of 'service' prescribed under Section 65B(44) of the Finance Act, 1994. 6. In the negative list Service ....
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....ard of Directors, is entrusted with substantial powers of management of the affairs of the company and includes a director occupying the position of the managing director, by whatever name called. "whole-time Director" includes a Director 2(94) in the whole time employment of the company;" "Executive Director" means a whole time director as defined in clause (94) of Section 2 of the Act. In the present case, the Board of Directors (BOD) are empowered to appoint under clause 93 of the Articles of Association, Managing Director and Whole-time Director with such conditions as may deem fit. It reads as follows : - 93. Managing Director/Whole-time Director/Manager. - Subject to provisions of the Act, the Rules framed thereunder and the approval of the Promoter(s), the Board may from time to time, appoint Managing Director/Whole-time Director/Manager for one or more of the divisions of the business carried on by the Company and to enter into agreement with him in such terms and conditions as they may deem fit. Also, the appointed Directors could be removed from their post by the Appellant company as per clause 94 of the Articles of Association which is mentioned as belo....
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....ention of the assessee in that case was that in order to assess the income as salary it must be held that there was a relation of master and servant between the company and the assessee. It was pleaded that for such a relationship to exist, it must be shown that the employee must be subject to the supervision and control of the employer in respect of the work the employee has to do. Where, however, there is no such supervision or control it will be a relationship of principal and agent or an independent contractor. Their Lordships analyzing the characteristics of master-servant relationship observed as : "6. There is no doubt that for ascertaining whether a person is a servant or an agent, a rough and ready test is, whether, under the terms of his employment, the employer exercises a supervisory control in respect of the work entrusted to him. A servant acts under the direct control and supervision of his master. An agent, on the other hand, in the exercise of his work is not subject to the direct control or supervision of the principal, though he is bound to exercise his authority in accordance with all lawful orders and instructions which may be given to him from time to time ....
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....ved at by the Board from time to time. The very fact that apart from his being a Managing Director he is given the liberty to work for the company as an agent is indicative of his employment as a Managing Director not 'being that of an agent. Several of the clauses of Article 140 as pointed out by the High Court specifically empower the Board of Directors to exercise control over the Managing Director, such, for instance to accept the title of the property to be sold by the company, providing for the welfare of the employees, the power to appoint attorneys as the Directors think fit, etc. As pointed out earlier under the terms of the agreement he can be removed within the period of 20 years for not discharging the work diligently or if he is found not to be acting in the interest of the company as Managing Director. These terms are inconsistent with the plea that he is an agent of the company and not a servant. The control which the company exercises over the assessee need not necessarily be one which tells him what to do from day to day. That would be a too narrow view of the test to determine the character of the employment. Nor does supervision imply that it should be a continuo....
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....etween them. In the present case, no such agreement exists between the employer and the Directors, hence there exists no employer-employee relationship. 15. We do not find merit in the argument of the Revenue inasmuch as during the course of investigation, the statement of Shri Atit Dalai, Vice President (Finance & Accounts) of the appellant company was recorded by the investigating officers on 4-6-2015. Answering the question No. 3. Mr. Dalal informed that there were four directors in the company and they were appointed in accordance with the provisions of Companies Act and Regulation of Article of Association of Company for managing day-to-day affairs of the company. Further answering to question No. 4, he has stated that the company are paying them remuneration which is nothing but salary. All the necessaiy deductions on account of Provident Fund, Professional Tax and TDS under Section 192 of the Income Tax Act are made as applicable; also they were issuing Form-16 like it is issued to all other employees. Even in the salary return filed by the appellant company before the Income Tax authorities, the director's names have been included. The company does not pay the director's....