No Double Tax, No Service Tax On Director’s Salary; CESTAT Kolkata Grants Complete Relief To Neelamber Caterers
Pranav B Prem
The Kolkata Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has set aside service tax demands and reversal of CENVAT credit raised against Neelamber Caterers Private Limited, holding that the issues were already conclusively settled in the assessee’s favour in an earlier decision. The Tribunal ruled that service tax could not be demanded twice on the same transaction under the reverse charge mechanism and that remuneration paid to a director as salary does not attract service tax.
The appeal was heard by K. Anpazhakan, Technical Member, and arose from an order passed by the Commissioner (Appeals), CGST & Central Excise, Kolkata, which had upheld service tax demands of ₹2.84 lakh and reversal of CENVAT credit amounting to ₹1.44 lakh. The demands pertained to alleged service tax liability on manpower supply services received under reverse charge and on remuneration paid to a director, along with denial of CENVAT credit on the corresponding invoices.
In respect of manpower supply services received from M/s Sonu Services, the department had demanded service tax from the assessee under the reverse charge mechanism, despite the service provider having already charged and paid service tax to the Government. The Tribunal noted that in the assessee’s own case for an earlier period, it had already held that once service tax has been collected and paid by the service provider, the same tax cannot again be demanded from the recipient, as such a demand would amount to double taxation. Following its earlier final order, the Bench held that the present demand on manpower supply services was not legally sustainable.
On the issue of service tax on remuneration paid to a director, the Tribunal observed that the amount in question was paid as salary and tax had been deducted at source under Section 192 of the Income Tax Act, with Form 16 being issued. It held that where a director is paid salary and functions as an employee of the company, the services rendered by such director during the course of employment fall outside the definition of “service” under Section 65B(44) of the Finance Act, 1994. Accordingly, no service tax could be levied on such remuneration.
The Tribunal also relied on the clarification issued by the Central Board of Excise and Customs (CBEC) vide Circular dated July 31, 2009, which clarifies that remuneration paid to managing directors or directors, whether whole-time or independent, for performing their duties as directors is not liable to service tax. The Bench noted that this circular is binding on the departmental authorities.
With regard to the denial of CENVAT credit, the Tribunal held that once service tax has been paid and valid invoices evidencing payment of tax are available, CENVAT credit cannot be denied merely on the ground that the department believes tax ought to have been paid by the recipient under reverse charge. Since the main service tax demands were found to be unsustainable, the consequential denial of credit also could not survive.
In view of the settled legal position and following its own earlier decision in the assessee’s case, the CESTAT set aside the impugned appellate order in its entirety. The Tribunal held that no interest or penalties could be imposed once the principal demands were quashed. Accordingly, the appeal filed by Neelamber Caterers Private Limited was allowed, and complete relief was granted with consequential benefits as per law.
Appearance
For Appellant: Shri Rishi Raju
For Respondent: Shri Prasenjit Das
Cause Title: M/s. Neelamber Catters Private Limited Vs. Commissioner of C.G.S.T. and Central Excise
Case No: Service Tax Appeal No. 75161 of 2024
Coram: K. Anpazhakan, Technical Member
