2024 (8) TMI 790

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....oyee for quitting a job before the time period prescribed under an agreement/ job letter is sustainable or otherwise. 2. Shri Dhaval Shah, Learned Counsel appearing on behalf of the appellant at the outset submits that the demand is not sustainable as the Notice Pay (tolerating an act) of an employee is not a declared service as it does not fall under the service. He submits that the identical issue has been considered in the following judgments:- (a) C.S.T.- Service Tax, Ahmedabad vs. Intas Pharmaceuticals Order No. A/12265/2012 dated 25.06.2021 (b) GE T & D India Limited Vs. Deputy Commissioner of C. Ex., Chennai - 2020 (35) G.S.T.L. 89 (Mad.) (c) Shriram Pistons and Rings Limited vs. CST, Ghaziabad 2020 (42)....

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....to service tax? No. Such amounts paid by the employer to the employee for premature termination of a contract of employment are treatable as amounts paid in relation to services provided by the employee to the employer in the course of employment. Hence, amounts so paid would [not] be chargeable to service tax. However any amount paid for not joining a competing business would be liable to be taxed being paid for providing the service of forbearance to act. 11. The query raised relates to a contra situation, one, where amounts have been received by an employee from the employer by reason of premature termination of contract of employment, and the taxability thereof. The Board has answered in the negative, pointing out that....

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.... the amount which he recovers out of the salary paid to the employee if the employee breaches the contract of total term of employment. From the record, we note that the term of contract between the appellant and his employee are that employee shall be paid salary and the term of employment is a fixed term and if the employee leaves the job before the term is over then certain amount already paid as salary is recovered by the appellant from his employee. This part of the recovery is treated by Revenue as consideration for charging service tax. 2. We hold that the said recovery is out of the salary already paid and we also note that salary is not covered by the provisions of service tax. The issue also stands decided by the Hon'ble ....