Maruti Suzuki India Ltd Vs Commissioner of Service Tax (CESTAT Chandigarh)
Summary: CESTAT Chandigarh held that “notice pay” and “bond money” recovered by Maruti Suzuki India Ltd. from employees leaving employment without serving the stipulated notice period or agreed minimum tenure were not consideration for any taxable service and consequently were not liable to service tax.
Maruti Suzuki had initially treated these receipts as taxable and paid service tax, but subsequently filed refund claims of Rs. 66,58,563/-, Rs. 24,06,169/- and Rs. 18,34,571/- for July 2012 to March 2015, April 2015 to March 2016 and April 2016 to March 2017 respectively. Revenue rejected the refunds on the ground that notice pay and bond money constituted consideration for a service outside the negative list.
The Tribunal noted that the jurisdictional officer had already accepted the appellant’s position for April-June 2017 by relying upon GE T & D India Limited Vs Deputy Commissioner of Central Excise. The Madras High Court had held that an employer permitting an employee’s sudden exit upon compensation does not render a taxable service or “tolerate” an act within Section 66E(e) of the Finance Act, 1994.
CESTAT also relied upon Manipal Academy of Higher Education, where premature-exit recoveries were regarded as measures intended to discourage and deter premature departure rather than consideration for a declared service. Accordingly, the Tribunal held that the issue stood settled in favour of Maruti Suzuki and allowed the appeals with consequential relief, if any, as per law.
