TaxTMI 
TaxTMI 
TaxTMI 
2025 (7) TMI 1410
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.... of accounts for the assessment year 2008-2009, the Authority has noticed that the Appellant had paid Rs.37,64,734/- in foreign currency to their subsidiary company viz. Same Deutz Fahr, North America towards the receipt of services from one Shri Vijay Raina, Director of SDF Group, North America and for reimbursement of his travel costs. The Department entertained the view that the appellant was in receipt of Management Consultancy Service from Shri Vijay Raina. Accordingly, the Show Cause Notice dated 15.04.2011 was issued to the Appellant to demand Service Tax of Rs.4,65,522/- for the period 2008-09 under the category of 'Management Consultancy Services'. On adjudication, the demand was confirmed along with interest and equal amount of penalty was imposed as proposed in the Show Cause Notice. Aggrieved by such Order-in-Original, the Appellant preferred an appeal before the first appellate authority. The First Appellate Authority upheld Order-in-Original No.39/2011 dated 16.12.2011 and dismissed the appeal. Hence, the present appeal before this forum. 3.1 The Ld. Advocate Shri S. Murugappan appeared and argued for the appellant and submitted that Shri Vijay Raina was a whole-time....
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....ness auxiliary service and hence service tax would not be leviable on such amount." 3.4 It is the Ld. Advocate's contention that without any allegation of misstatement or suppression, extended period cannot be invoked and imposition of penalty under Section 78 is not sustainable. Regarding mandatory penalty, he submitted that the show cause notice does not contain any allegation of suppression and fraud and hence, mandatory penalty under Section 78 is not attracted. He further submitted that imposition of equal penalty in this case is not correct as the Appellant has paid service tax demand with interest within 30 days from the date of Show Cause Notice. 4.1 Per contra, Shri N. Satyanarayana, the Ld. Authorized Representative for the Revenue has submitted that the Appellant on the one hand stated that Shri Vijay Raina is one of the Directors of the Company and the charges paid were only part of salary, and on the other hand also stated that they paid some amount under Business Auxiliary Service for the said payments made in foreign currency. 4.2 The Ld. AR has contended that the Appellant has not explained whether the services for which they had registered under Business Auxilia....
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....ey managerial personnel' under Section 2(51) of the Companies Act. Further, he is an officer in default [as defined in clause (60) of Section 2] for any violation or non-compliance of the provisions of Companies Act. Thus, in our view, the whole-time director is essentially an employee of the Company and accordingly, whatever remuneration is being paid in conformity with the provisions of the Companies Act, is pursuant to employer-employee relationship and the mere fact that the whole-time director is compensated by way of variable pay will not in any manner alter or dilute the position of employer-employee status between the company assessee and the whole-time director. We are thoroughly convinced that when the very provisions of the Companies Act make whole-time director (as also in capacity of key managerial personnel) responsible for any default/offences, it leads to the conclusion that those directors are employees of the assessee company. 7. Further, in the present case, the appellant has duly deducted tax under Section 192 of the Income-tax Act which is the applicable provisions for TDS on payments to employees. This factual and legal position also fortifies the submission....
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....e charge mechanism or otherwise. 7. On perusal of the agreement with Mr. Alan Van Niekerk, we find that the said agreement is between appellant and one Mr. Alan Van Niekerk for rendering the services to appellant on the management of market and exclusive services. The said agreement provides for payment of an amount as monthly remuneration of Mr. Alan Van Niekerk and as also additional amount at the discretion of the board as percentage to Alan Van Niekerk. It is seen from the records and more specifically the balance sheet at 31-7-2007, Mr. Alan Van Niekerk has signed the balance sheet of the appellant as director on behalf of the board of directors. In our considered view, Shri Alan Van Niekerk was a director in the appellant's company and the amount which is paid to him during the period 18-4-2006 to 31-10-2006 was a remuneration as per agreement between the appellant and the said individual. We also fortified in our view, by the demand issued by Income Tax department for this amount paid to Mr. Alan Van Niekerk to be considered as salary paid. The Income Tax Department has considered this amount paid to the appellant to Mr. Alan Van Niekerk as a salary in adjudication proceed....
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....the Form-16 statement issued to the Directors for the financial years 2012-2013 and 2013-2014 and have claimed in appeal papers that the Directors are employees of the company. However, we find that such documentary evidence was not submitted before the Adjudicating Authority. Hence we deem it necessary to set aside the operation of the Order-in-Original No. 08/COMM/ST/SLG/13-14, dated 6-2-2014 only in respect of the demand of service tax on the amount paid to the Directors and remand the matter to the Adjudicating Authority to consider the documentary evidence produced by the appellant and redecide the issue." 8. In the instant case, the Appellant has not produced any documentary evidence either before the Original Adjudicating Authority or the Lower Appellate Authority to prove that the amount paid was pertaining to salary of Shri Vijay Raina. It has to be observed that the matter would have been simpler if salary bill or Form-16 issued to the Director, or Income Tax returns filed had been submitted, which is not the case. 9. However, a perusal of appeal records indicates that the demand of service tax was made under Management Consultancy Service for the period from May 2008 t....