TaxTMI 
TaxTMI 
2026 (5) TMI 644
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....ice tax liability on the said services. The department entertained the view that the appellant is liable to pay service tax on such fee and commission under reverse charge under Notification No. 30/2012 dated 20.06.2012 as amended vide notification No. 45/2012 dated 07.08.2012 i.e. the services provided or agreed to be provided by a Director of a company to the said company was notified as a taxable service. 2.1 On this allegation, a show cause notice dated 25.09.2014 was issued demanding the service tax amounting to Rs. 11,12,400/- under Section 73(1) of the Finance Act, 1994 along with applicable interest under Section 75 of the Finance Act, 1994 and penalties under Section 77(1)(a), 77(1)(b), 70 and 78 of the Finance Act, 1994. 2.2 After following the due process, the adjudicating authority confirmed the demand of service tax, interest and penalty. Aggrieved by the said order, appellant filed appeal before the Commissioner who rejected the same, hence, the present appeal. 3. Heard both the parties and perused the material on record. 4. Learned Counsel appearing on behalf of the appellant submits that the impugned order is not sustainable in law as the same has been p....
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....t disputed the status of the director being employee of the company to whom the salary has been paid by the appellant and no demand of service tax has been made on that salary amount paid to whole-time directors as commission/ perquisites/performance incentive. 5. On the other hand, Learned AR reiterated the finding of the impugned order. She further submitted that the performance commission and perquisite paid to the directors are subject to service tax and simply because the appellant has passed Board resolution and has deducted the TDS from the salary under the Income Tax Act, 1961 does not debar the department from the claiming the service tax on the commission/perquisite. In support of her submission, she has relied upon the following decision:- • BRAHM ALLOY LIMITED VS. COMMISSIONER OF CGST & C.EX., DURGAPUR reported in 2019 (24) G.S.T.L 616 (Tri. Cal) • M/s. Sanwaria Agro Oils Limited vs. Commissioner of Central Excise and Service Tax, Bhopal reported in 2024 (7) TMI 549 -CESTAT NEW DELHI. 6. I have considered the submissions of both the parties and perused the material on record. The only issue to be decided in the present case is whether per....
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.... the instant case, the only dispute herein is for payment of remuneration in the nature and form of commission based on percentage of profit to whole time directors, which is a fact on record. Section 2(94) of Companies Act, 2013, duly defines 'whole-time director' to include a director in the whole-time employment of the company. A whole-time Director refers to a Director who has been in employment of the company on a full-time basis and is also entitled to receive remuneration. The certificate issued by the company secretory states that the remuneration is given in various form as allowed under the Companies act, 2013. We further find that the position of a wholetime director is a position of significance under the Companies Act. Moreover, a whole-time director is considered and recognized as 'key 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 provis....
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.... not a 'service' within the definition of 'service' prescribed under Section 65B(44) of the Finance Act, 1994. ....16. Also, from the documents produced by the appellant it is crystal clear that the Directors who are concerned with the management of the company, were declared to all statutory authorities as employees of the company and complied with the provisions of the respective Acts, Rules and Regulations indicating the Director as an employee of the company. No contrary evidence has been brought on record by the Revenue to show that the Directors, who were employee of the appellant received amount which cannot be said as ' salary' but fees paid for being Director of the company. The Income Tax authorities also assessed the remuneration paid to the said directors as salary, a fact cannot be ignored. The judgments cited by the revenue cannot be applied to the present case as the facts are different and the finding of Income tax authorities accordingly also different in the said case." • In the case of Supreme Treon Pvt. Limited v Commissioner of Central Excise, CESTAT - Ahmedabad this Tribunal under identical facts and circumstances has passed the following....
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...., 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 makes 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 which is the applicable provisions for TDS on payments to employees. This factual and legal position also fortifies the submission made by the appellant that the whole time directors who are ent....
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....dered and recognized as a 'key 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 makes 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 which is the applicable provisions for TDS on payments to employees. This factual and legal ....