Custom, Excise & Service Tax Tribunal
Maruti Suzuki India Ltd vs Delhi-Iv on 9 March, 2026
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
CHANDIGARH
REGIONAL BENCH - COURT NO. I
Service Tax Appeal No. 60548 of 2016
[Arising out of Order-in-Appeal No. 124/ST/APPEAL-II/MK/GGN/2015-16 dated
22.08.2016 passed by the Commissioner (Appeals-II), of Service Tax, Gurgaon]
M/s Maruti Suzuki India Ltd ......Appellant
Finance Division, Palam Gurugaon Road,
Gurgaon, Haryana-122015
VERSUS
Commissioner of Service Tax-Delhi-iv ......Respondent
Plot No. 36-37, Sector-32, Opposite Medanta Hospital, NH-IV, Gurugram, Haryana-121001 WITH Service Tax Appeal No. 60415 of 2017 [Arising out of Order-in-Appeal No. 26/ST/APPEAL-II/MK/GGN/2017 dated 27.02.2017 passed by the Commissioner (Appeals-II), of Service Tax, Gurgaon] M/s Maruti Suzuki India Ltd ......Appellant Finance Division, Palam Gurugaon Road, Gurgaon, Haryana-122015 VERSUS Commissioner of Service Tax-Delhi-iv ......Respondent Plot No. 36-37, Sector-32, Opposite Medanta Hospital, NH-IV, Gurugram, Haryana-121001 AND Service Tax Appeal No. 60467 of 2018 [Arising out of Order-in-Appeal No. 303/ST/CGST-APPEAL-GURUGRAM/SG/2017 dated 31.01.2018 passed by the Commissioner (Appeals-II), of Central Goods and Service Tax, Gurgaon] M/s Maruti Suzuki India Ltd ......Appellant Finance Division, Palam Gurugaon Road, Gurgaon, Haryana-122015 2 ST/60548/2016, 60415/2017, 60467/2018 VERSUS Commissioner of Central Excise and ......Respondent Service Tax-Gurgaon-I Plot No. 36-37, Sector-32, Opposite Medanta Hospital, NH-IV, Gurugram, Haryana-121001 APPEARANCE:
Ms. Krati Singh and Shri Monarch Mittal, Advocates for the Appellant Shri Narinder Singh and Shri Yashpal Singh, Authorized Representatives for the Respondent CORAM: HON'BLE MR. S. S. GARG, MEMBER (JUDICIAL) HON'BLE MR. P. ANJANI KUMAR, MEMBER (TECHNICAL) FINAL ORDER NO. 60225-60227/2026 DATE OF HEARING: 27.02.2026 DATE OF DECISION: 09.03 .2026 P. ANJANI KUMAR :
M/s Maruti Suzuki India Ltd, the appellants are engaged in the manufacture of motor vehicles and parts thereof; the appellants employ various professionals for different job profiles; the professionals employed are given an offer letter specifying certain conditions; one of the conditions is that they would give sufficient notice before leaving the organization and in case of failure to give sufficient notice the professionals are required to compensate by paying a "notice pay"; the second is for serving the organization for an agreed period in case the selected professionals are sent for training by the appellants; in case the professionals leave the organization they are required to pay the amount specified in the bond which is called "bond money" after the training; such
3 ST/60548/2016, 60415/2017, 60467/2018 professionals execute a bond with the appellants. The appellants entertained an opinion that such money received by them was exigible to service tax and accordingly, have paid the service tax; having found that the same are not taxable, the appellants filed refund claims of Rs. 66,58,563/-, Rs. 24,06,169/- and Rs. 18,34,571/-, for the periods July 2012 to March 2015, April 2015 to March 2016 and April 2016 to March 2017, respectively. Revenue was of the opinion that the money received in the form of "notice pay"
and "bond money" by the appellants from their employees constitutes a consideration for a service which is not in the negative list and accordingly the appellants are not entitled for refund; Show Cause Notices dated 06.11.2015, 27.07.2016 were issued to the appellants and vide orders in original dated 16.03.2016, 24.10.2016 and 05.10.2017, the refunds claimed were rejected. On an appeal preferred by the appellants vide impugned order dated 22.08.2016, 27.02.2017 and 31.01.2018, the Orders in Original were upheld.
Hence these appeals.
2. Ms. Krati Singh and Shri Monarch Mittal, learned counsel for the appellants, submits that the brief issue involved in the present proceedings is as to whether compensation received for failure to perform under a contract constitutes a declared service under Section 66 (e) of the Finance Act, 1994. The issue is no longer res integra as various High Courts have consistently held that amounts received for a non-performance of a contract does not fall under the ambit of "agreeing to the obligation to refrain from an act or to tolerate an act or a situation or to do an act, as a declared service." They would
4 ST/60548/2016, 60415/2017, 60467/2018 further submit that the issue is already decided by the department itself, in the case of appellants themselves, vide order in original dated 21.12.2020 for the period April 2017 to June 2017. The order has not been challenged by the Revenue and the refund due to them has already been sanctioned to the appellants. They also relied on Hon‟ble Madras High Court‟s decision in the case of GET & D, 2020 (1) TMI 1096 Madras High Court.
3. The learned counsel submits that Revenue cannot now take a different stand as held in SS Engineers, dated 07.07.2023 (SC) and Rosmerta Technologies Ltd., 2020-TIOL-916-CESTAT-CHD. She also relies on the circular no. 178/10/2022-GST dated 03.08.2022 which clarified that forfeiture of salary or payment of bond amount in the event of the employee leaving an employment before the minimum agreed period shall not be taxable under GST; she further submits that Para 5 (e) of Schedule II of CGST Act, is identically worded as Section 66 (e). The clarification has been reiterated in the circular no. 214/1/2023-Service Tax dated 28.02.2023.
4. She submits that it has been specifically held, in many cases, that "notice pay" and "bond money" received from the employees for not completing their stipulated tenure does not fall under the ambit of taxable services. She submits that a conjoint reading of Section 66E
(e) of the Act with Section 64(1) of the Act that pertains to value of services for the purpose of levying service tax; the following 2 conditions needs to be fulfilled for levying service tax on particular service under the ambit of „declared service‟ under Section 66E(e) of the Act:
5 ST/60548/2016, 60415/2017, 60467/2018 i A person must have performed any of the following activities i.e., (a) agrees to the obligation to refrain from an act; (b) agrees to the obligation to tolerate an act or situation; (c) agrees to the obligation to do an act; and ii The above stated activity must be performed in return for consideration.
She relies on the following cases:
GE T & D India Limited vs. Deputy Commissioner of Central Excise, 2020 (1) TMI 1096 - Madras High Court Rajasthan Rajya Vidyut Prasaran Nigam Ltd. vs. Commissioner of Central Goods and Services Tax, Customs and Central Excise, Jodhpur 1, 2022 (1) TMI 909-CESTAT New Delhi Manipal Academy of Higher Education vs. Commissioner of Central Tax (Appeals), Belgaum, 2025 (4) TMI 818 - CESTAT Bangalore M/s. Biocon Ltd VS. Commissioner of Central Tax, South Commissionerate, Bangalore, 2024 (7) TMI 8 - CESTAT Bangalore Linde Engineering India Private Limited vs. CCE & ST -
Vadodara-l, 2024 (10) TMI 1544- CESTAT, Ahmedabad Linde Engineering India Private Limited vs. C.C.E. & S.T. -Vadodara-l, 2023 (3) TMI 641-CESTAT Ahmedabad Krishak Bharti Co Operative Ltd vs. C.C.E. & S.T. -
Surat-l, 2023 (1) TMI 509 - CESTAT Ahmedabad M/s Balaji Medical & Diagnostic Research Centre vs. Principal Commissioner, Central Goods & Service Tax (East Delhi), New Delhi, 2023 (12) TMI 748- CESTAT, New Delhi The Lalit Mumbai v. Commissioner of CGST & Central Excise - Delhi East and Ors., 2025 (3) TMI 680 - CESTAT, New Delhi
6 ST/60548/2016, 60415/2017, 60467/2018 M/s KJS Cement Ltd vs. Commissioner of CGST, Central Excise & Customs Jabalpur (M.P.), 2023 (12) TMI 903 - CESTAT New Delhi Cosmo First Limited vs. Commissioner of C.E. & S.T. - Vadodara-l, 2025 (10) TMI 9 - CESTAT Ahmedabad M/s. Instakart Services Pvt. Ltd. vs. Commissioner of Central Tax, Bengaluru, 2024 (3) TMI 1350 - CESTAT Bangalore South Eastern Coalfields Ltd., 2020 (12) TMI-912- CESTAT New Delhi South Eastern Coalfields Ltd., 2023 (8) TMI-606-SC Order GE T & D India Limited (supra) K.N. Food Industries Pvt Ltd vs. Commissioner of CGST & CE, Kanpur, 2020 (1) TMI 6- CESTAT Allahabad Reliance Life Insurance Company Ltd vs CST, Mumbai- II 2018-TIOL-1308-CESTAT-MUM
5. Learned Counsel submits further that the impugned order was passed without application of mind and simply reiterating the findings of the OIO; the appellate authority failed to take note of various submissions of the appellants on the non-applicability of service tax in the instant case. She also submits that the appellant is entitled to refund under Section 11BB of Central Excise Act, 1944. She relies on the following cases:
M/s Cohesive Infrastructure Developers Pvt Ltd vs. Union of India & Prs., 2025 (4) TMI 451- Patna High court M/s Dow Chemicals International Pvt Ltd vs. Commissioner of Service Tax-VII, Mumbai, 2021 (11) TMI 991- CESTAT Mumbai Sandvik Asia Ltd vs. Commissioner of Income Tax-I, Pune, 2006 (197) E.L.T. 257 (SC) 7 ST/60548/2016, 60415/2017, 60467/2018 Ranbaxy Laboratories Ltd vs Union of India and Ors., 2011 (10) TMI 16- S.C.
6. Shri Narinder Singh and Shri Yashpal Singh, learned authorized representatives for the Revenue reiterate the findings of the impugned orders.
7. Heard both sides and perused the records of the case. The brief issue which requires consideration in the instant case is as to whether the appellants are liable to pay service tax on "notice pay" and "bond money" recovered from the employees leaving their job with the appellants. Learned counsel for the appellants submits that the issue is no longer res integra in a number of cases including by the jurisdictional Assistant Commissioner in their own case for the period April-June, 2017. We find that the jurisdictional officer vide impugned order dated 21.12.2020 relied on the decision of the Hon‟ble Madras High Court in the case of GET&D (supra). We find that the Hon‟ble High Court held that:
11. The query raised relates to a contra situation, one, where amounts have been received by an employee from the employer by reason of premature termination of contract of employment, and the taxability thereof. The Board has answered in the negative, pointing out that such amounts would not be related to the rendition of service. Equally, so in my view, the employer cannot be said to have rendered any service per se much less a taxable service and has merely facilitated the exit of the employee upon imposition of a cost upon him for the sudden exit. The definition in clause (e) of Section 66E as extracted above is not attracted to the scenario before me as, in my considered view, the employer has not tolerated' any act of the employee but has permitted a
8 ST/60548/2016, 60415/2017, 60467/2018 sudden exit upon being compensated by the employee in this regard.
12. Though normally, a contract of employment qua an employer and employee has to be read as a whole, there are situations within a contract that constitute rendition of service such as breach of a stipulation of noncompete. Notice pay, in lieu of sudden termination however, does not give rise to the rendition of service either by the employer or the employee.
8. We further find that Bangalore Bench of the Tribunal in the case of Manipal Academy of Higher Education (supra) held that
10. We find that the issue is no longer res integra, the issue is squarely covered by the decisions/judgments cited, supra. Premature leaving of the employment results in disruption of work and an undesirable situation. The provisions for forfeiture of salary or recovery of bond amount in the event of the employee leaving the employment before the minimum agreed period or the amount forfeited from the students, who discontinue the course midway cannot be considered as liquidated damage or service under the category of declared service. It can be considered as penalties for dissuading, to discourage and to deter such a situation.
9. In view of the above, we find that the issue is settled in favour of the appellants. Therefore, we allow their appeals with consequential relief, if any, as per law.
(Order pronounced in the open court on 09.03.2026) (S. S. GARG) MEMBER (JUDICIAL) (P. ANJANI KUMAR) MEMBER (TECHNICAL) Palak