Maruti Suzuki India Ltd Vs Commissioner of Service Tax (CESTAT Chandigarh)
In Maruti Suzuki India Ltd v. Commissioner of Service Tax, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh considered whether amounts recovered by an employer from employees in the form of “notice pay” and “bond money” are subject to service tax under the Finance Act, 1994.
The appellant is engaged in the manufacture of motor vehicles and parts. It employs various professionals under offer letters containing specific conditions. One condition requires employees to give sufficient notice before leaving the organization. If they fail to provide the required notice, they must compensate the employer by paying “notice pay.” Another condition applies where employees are sent for training. In such cases, they are required to serve the organization for an agreed period. If they leave earlier, they must pay the amount specified in a bond executed with the employer, referred to as “bond money.”
Initially, the appellant believed that the amounts received as notice pay and bond money were liable to service tax and accordingly paid tax on such receipts. Subsequently, the appellant concluded that these amounts were not taxable and filed refund claims for service tax already paid. The refund claims amounted to ₹66,58,563 for the period July 2012 to March 2015, ₹24,06,169 for April 2015 to March 2016, and ₹18,34,571 for April 2016 to March 2017.
