TaxTMI 
TaxTMI 
2025 (10) TMI 9
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....r Section 77(2) and 78 of the Finance Act, 1994. 1.1 The matter was decided by the Assistant Commissioner who vide order dated 28.05.2018 rejected the plea taken by the appellant and confirmed the service tax demand of Rs.77,791/- along with interest as proposed in the show cause notice. He also imposed a penalty of Rs. 10,000/- under Section 77(2) and a penalty equal to 50% of the service tax involved for the period from July,2012 to 14.05.2015 (it should be 13.05.2015) and penalty equal to 100% of the Service tax payable for the period 14.05.2015 to March, 2017. Aggrieved with this order, Appellant filed appeal before Commissioner (Appeals) who vide impugned order dated 30th November, 2018 upheld the order of the lower authority and rejected their appeal. Hence, the present appeal. 2. In their appeal, the appellant took the following grounds: a) The Department has maintained that any Notice pay recovered by an employer from the employee in lieu of notice to be provided by the employee to the employer before discontinuing employment which may be in accordance with agreement of employment, written or verbal, is to be taken as taxable amount. b) Notice pay is....
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....ding service tax for a period beyond the normal limitation. h) The issue has been settled by Hon'ble Commissioner (Appeals), Vadodara in the case of Amoli Organics Pvt Ltd, Vadodara vide OIA No. VAD-EXUCS-001-APP-221-222/2017-18 dated 21.07.2017. Similar view was expressed by the Commissioner (Appeals), Ahmedabad in his OIA No. AHM-EXCUS-003-APP-086-17-18 dated 30.08.2017 in the case Johnson Controls- Hitachi Air Conditioning India Ltd, Mehsana. Therefore, their appeal may be allowed by setting aside the impugned OIA. 3. During hearing, learned Advocate drew attention of the Bench towards provisions of Finance Act, 1994, CBEC Education guide dated 28.06.2012, Circular No. 178/10/2022-GST dated 03.08.2022 and Circular No. 214/1/2023-ST dated 28.02.2023. He also highlighted the decision of Hon'ble Madras High Court in the case of GE T & D India Ltd Vs. CCE- 2019 (12) TMI 1566, wherein it was held that though normally, a contract of employment qua an employer and employee has to be read as a whole, there are situations within a contract that constitute rendition of service such as breach of a stipulation of noncompete. Notice pay, in lieu of sudden termination, however doe....
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....ity carried out by a person for another person for consideration and declaration as such under section 66E. Section 66E included 'agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act'. The legal provisions as applicable during the relevant period were as follows: SECTION 65B. Interpretations. In this Chapter, unless the context otherwise requires.- (22) "Declared service" means any activity carried out by a person for another person for consideration and declared as such under section 66E; (44) "service" means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely:- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner, or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution, or (iii) a transaction in money or actionable claim (b) a provision of service by an employee to the employer in the course of or in rela....
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....ges (where the court decides the quantum of damages) or liquidated damages (where the contract itself provides that damages of such and such amount will be paid in case of non-performance of the contract). While a contract for any service specifies both the service to be rendered and the consideration to be paid for such service, it also has other clauses which define the conditions of the contract which include details of how the parties must fulfil their parts of the contract. These conditions, often include a clause on 'liquidated damages if a party fails to fulfil its obligations under the contract as laid down in the conditions. Consideration is the result of successful performance of the contract while compensation is paid by the party frustrating the contract to the other. Compensation is also paid, if the contract so provides, when one party performs under the contract but not within the conditions laid down, such as delays in performance. A few illustrations will make this point clearer. A doctor performs a surgery and gets paid a fee. Here the surgery is the service of the doctor and the fee is the consideration and the purpose of the contract (written or otherwi....
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.... Service' under Section 66E(e) and is exigible to service tax. 11. This, in our view, is not the correct reading of the contract. Contract, is an agreement enforceable by law. Section 2 of The Indian Contract Act, 1872 is reproduced below: "2. Interpretation-clause. -In this Act, the following words and expressions are used in the following senses, unless a contrary intention appears from the context- (a) When one person signifies to another his willingness to do or to abstain from doing anything. With a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal; (b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise; (c) The person making the proposal is called the "promisor", and the person accepting the proposal is called the "promise"; (d) When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a cons....
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....the agreement is for something else and if one of the parties fails to perform as per the agreement and pays to the other a compensation as pre-decided in the agreement, it does not fall under Section 66E(e). This view was taken by this Tribunal in several cases. In M/s. Repco Home Finance Ltd. (Service Tax Appeal No. 511 of 2011), decided by MISCELLANOUS ORDER NO. 40053/2020 dated 8.6.20201, the larger bench of this Tribunal held that no service tax can be charged on loan pre-payment charges. In South Eastern Coalfields Ltd. [2020-TIOL-1711-CESTATDEL), the amounts received by the appellant as penalty from other parties for non-observance or breach of terms of contract in the commercial contracts it entered into were held to be not chargeable to service tax under section 66E(e). In MNH Shakti Ltd. [2021-TIOL-732- CESTAT-KOL), Revenue's demand of service tax under section 66E(e) on the compensation which the appellant received from the Government for cancellation of the coal blocks was set aside. In the case of Ruchi Soya Ltd. [2021-TIOL-402-CESTAT-DEL], the appellant entered into an agreement for maintenance of wind farms and paid the contractor. However, where the machine avai....
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....ould be liable to be taxed being paid for providing the service of forbearance to act." 17 Referring to the above clarification by the CBEC, High Court of Madras has, in GE T&D India Ltd. [2019 (12) TMI-1566- Madras High Court] held that notice pay, in lieu of sudden termination, does not give rise to the rendition of service either by the employer or the employee and allowed the writ petitions. Thus, the specific issue in this case is no longer res integra GE T&D India Ltd. was followed in Intas Pharmaceuticals [2021-TIOL-367-CESTAT-AHM], State Street Syntel Services Pvt. Ltd. [2021-TIOL- 152-CESTAT-MUM] Shri Ram Pistons and Rings Ltd. [2020 (42) GSTL 79 (Tri-All)) and HCL Learning Ltd. [2019- TIOL-3545-CESTAT-AII]. 18. Learned Departmental Representative submitted that the clarification by the CBEC was clear and it was held that the termination pay received by the employee is not exigible to tax because in such as case, it is the employee who is the service provider and the service provided by him in the course of employment is excluded from the definition of service. However, where the employer recovers any amount, the service provider will be the employer and ....