Case Law Details
Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. Vs Commissioner of Central Goods and Services Tax (CESTAT Delhi)
No service tax payable on amount of notice pay recovered from employer in lieu of sudden termination of employees
The CESTAT, Delhi in M/s Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. v. Commissioner of CGST, Customs [Service Tax Appeal No. 53020 of 2018 dated January 14, 2022] set aside the order passed by the Revenue Department confirming demand of service tax on the notice pay recovered by the assessee from its employees for premature resignation. Held that, no service tax is payable on notice pay in lieu of sudden termination, as it does not give rise to the rendition of service either by the employer or the employee, and compensation for failure under a contract cannot be consideration for service. Further held that such contract cannot be termed as declared service.
Facts:
M/s Rajasthan Rajya Vidhyut Prasaran Nigam Ltd. (“the Appellant” / “the Employer”) is a public sector undertaking of the Government of Rajasthan and engaged in transmission of electricity. An audit took place by the Service Tax Department, and it was found that the Appellant did not discharge service tax of INR 28,10,698/- for the amount recovered from its employees on their premature resignation i.e. without giving the requisite notice period.
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