Case Law Details
Vectus Industries Ltd. Vs Commissioner of Service Tax (CESTAT Allahabad)
If the entire remuneration stands considered by Income Tax Authorities as salary, the same cannot be considered as service, so as pay the service tax. The Income Tax Authorities are the prime authority to adjudge the said issue. If according to the learned Advocate the Income Tax Authorities have considered the entire remuneration as salary and have taxed the same accordingly, the said fact would have a bearing on the disputed issue before us. Inasmuch as, the adjudicating authority has not dealt with the said aspect and has not verified the fact of assessment by Income Tax Authorities under the head ‘salary’, we deem it fit to set aside the impugned order and remand the matter to the Original Adjudicating Authority for fresh consideration. Needless to say that the appellant would be given an opportunity to put forth their case and they would be at liberty to contest the demand by inviting the attention of the Original Adjudicating Authorities to the provisions of the Companies Act. All other issues are kept open including the plea of limitation.
FULL TEXT OF THE CESTAT JUDGEMENT
After hearing both the sides, we find that a short issue required to be decided in the present appeal is as to whether the commission earned by the Managing Director of the appellant company, apart from his fixed salary, is in lieu of services provided by him for promotion of the sales in the market and hence is liable to service tax. The lower authorities have held that the same is a service and accordingly, service tax to the tune of Rs.19,99,807/- stands confirmed against them for the period from 2012-13 to 2013-14 by raising a show cause notice on 03.11.2016. The demand confirmed by the Original Adjudicating Authority stands upheld by Commissioner (Appeals) along with upholding the imposition of penalties and hence the present appeal.
2. Learned Advocate Shri Vishal Kumar appearing for the appellant argued that the commission earned by the Managing Director is nothing but his salary and draws our attention to the employment agreement wherein it was specifically provided that apart from the fixed amount, commission, linked to the sales would be provided to him. He also draws our attention to the various provisions of the Companies Act indicating that the entire remuneration of the managing Director is required to be considered as salary.
3. On a specific question, as to how the TDS was detected by the Company, he clarifies that initially two different forms i.e. form 16 and form 16A were filed by them with the Income Tax Department in terms of the provisions of Section 194H of the Income Tax Act and under Section 192. However, he submits that the said action of the company was a mistake which was subsequently rectified and modified application was filed before the Income Tax Authorities. Income Tax Authorities have assessed the payment of TDS under the head ‘salary’. Though the learned Advocate has produced the said documents but on being questioned, fairly agrees that the same were not available before the Original Adjudicating Authority who has not given any finding in respect of the same.
4. On the said issue itself, we consider that if the entire remuneration stands considered by Income Tax Authorities as salary, the same cannot be considered as service, so as pay the service tax. The Income Tax Authorities are the prime authority to adjudge the said issue. If according to the learned Advocate the Income Tax Authorities have considered the entire remuneration as salary and have taxed the same accordingly, the said fact would have a bearing on the disputed issue before us. Inasmuch as, the adjudicating authority has not dealt with the said aspect and has not verified the fact of assessment by Income Tax Authorities under the head ‘salary’, we deem it fit to set aside the impugned order and remand the matter to the Original Adjudicating Authority for fresh consideration. Needless to say that the appellant would be given an opportunity to put forth their case and they would be at liberty to contest the demand by inviting the attention of the Original Adjudicating Authorities to the provisions of the Companies Act. All other issues are kept open including the plea of limitation.
(Dictated and pronounced in open court)
