2026 (7) TMI 1943

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....cted the appeal of the Appellant by upholding the Order-in- Original dated 16.03.2018. 2. Briefly stated facts of the present case are that the Appellant M/s Neel Metal Products Ltd are engaged in the manufacture of auto components and during the relevant period, were registered under the Central Excise Act, 1944 and Finance Act, 1994. On the basis of scrutiny of records during the audit conducted in January 2017 for the period 2015-16, a view was taken by the Department that the amounts received by the Appellant as 'notice pay' constituted consideration for the declared service of "agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act" under Section 66E(e) of the Finance Act, 19....

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.... failure to serve the notice period, and not on account of any act or omission on the part of the Appellant; a payment made by a person for his own act or omission, which is in the nature of a breach of the terms of an agreement, to the person put to disadvantage thereby, is in the nature of penalty or compensation and cannot be regarded as consideration for a service. 4.2 He further refers to CBIC's Circular No. 178/10/2022-GST dated 03.08.2022 read with Circular No. 214/1/2023-ST dated 28.02.2023 which itself has clarified that activities contemplated under Section 66E(e) of the Finance Act, 1994 are only those conceived in an independent contractual arrangement specifically referring to such activity with a flow of consideration havin....

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.... limitation. 5. On the other hand, the learned Authorized Representative for the Respondent-Revenue reiterates the findings of the impugned order. 6. After considering the submissions made by both the parties and perusal of the material, we find that the issue involved in the present case is whether the amount received/recovered by an employer from an outgoing employee as 'notice pay', i.e. salary in lieu of the contractually stipulated notice period, is consideration for a 'declared service' under Section 66E(e) read with Sections 65B(44) and 66B of the Finance Act, 1994, exigible to service tax or not? 7. We find that the said issue is no more res integra and is squarely covered by the judgment of the Hon'ble Madr....