Custom, Excise & Service Tax Tribunal
Neelamber Caterers Pvt Ltd vs -Kolkata South on 22 July, 2025
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
EASTERN ZONAL BENCH: KOLKATA
REGIONAL BENCH - COURT NO. 1
Service Tax Appeal No. 75445 of 2020
(Arising out of Order-in-Appeal No. 10/Kol-South/2020 dated 02.09.2020 passed by
the Commissioner of CGST & Central Excise(Appeal-I), Kolkata GST Bhawan (1st
Floor), Room No.-119,180, Shantipally, Kolkata-700 107)
M/s. Neelamber Caterers Private Limite : Appellant
5B, Judges Court Road
Kolkata-700 027
VERSUS
Commissioner, CGST, Central Excise, Appeal-I : Respondent
Kolkata
GST Bhawan (1st Floor),
Room No.-119,180, Shantipally,
Kolkata-700 107
APPEARANCE:
MS. Shreya Mundhra, Advocate for the Appellant
Shri S. K. Jha, Authorized Representative for the Respondent
CORAM:
HON'BLE SHRI K. ANPAZHAKAN, MEMBER (TECHNICAL)
FINAL ORDER NO.76989/ 2025
DATE OF HEARING: 17.07.2025
DATE OF PRONOUNCEMENT: 22.07.2025
ORDER:[PER SHRI K. ANPAZHAKAN] The present appeal has been filed against the Order-in-Appeal No. 10/KOL-South/2020 dated 02.09.2020, wherein the Ld. Commissioner (Appeals) had upheld the demands confirmed in the Order-in-Original.
2. M/s. Neelamber Caterers Private Ltd. (herein after referred as the Appellant) is a company engaged in providing outdoor catering services and ST Appeal No.75445 of 2020 renting of immovable property services, registered with the Service Tax Department vide Registration No. AABCN1101BST001. The books of accounts of the Appellant were audited from time to time.
2.1. Audit conducted by the Service Tax Audit Commissionerate, Kolkata on the appellant company has made the following observations:
Sale of sweet boxes
- The sale of sweet box are taxable under the head of Outdoor Catering Service as per the provision of Rule 2C of Service Tax (Determination of Value) Rules, 2006, wherein goods being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity at a restaurant or as outdoor catering shall be specified percentage of the total amount charged for such supply.
Legal services, Goods transportation agency services & manpower agency services
- Legal services, Goods transportation agency services & manpower agency services were liable to tax under reverse charge mechanism under Notification No. 30/2012- ST dated 20.06.2012.
Payment of director's remuneration
- The Department alleged that these directors were not full-time employees/whole time director but were sharing time with one ST Appeal No.75445 of 2020 other Company. Mr. Dipak kumar Singh and Mrs. Laxmi Singh were engaged as employees in two companies - the Appellant Company and M/s. Kanak Land Development Co. Pvt. Ltd. Further, Mr. Arnish Singh & Yash Singh were engaged as employees in two companies - the Appellant Company and M/s Multiflora (Horticulture) Pvt. Ltd. Thus, the remuneration paid to them was liable to service tax under reverse charge.
Availment of CENVAT Credit
- The services received from Anandlok Welfare association were ineligible to credit considering the fact that the billing address and the registered address of the Appellant did not match.
- Certain invoices were failed to be produced by the Appellant for availing credit in terms of the CENVAT Credit Rules, 2004.
2.2. On the basis of these audit findings, Show Cause Notice bearing No. V(15)2/Adjn/Neelamber/AC/RB/CGST & CX/Kol/18-
19/1763 dated 17.04.2018(SCN) was issued to the appellant demanding Service tax of Rs. 24,83,858/- . The Notice also proposed demand of irregular Cenvat credit of Rs. 4,46,043/- along with interest and penalty thereon.
2.3. Thereafter, the Appellant voluntarily discharged service tax liability towards receipt of legal consultancy services and goods transport ST Appeal No.75445 of 2020 agency (GTA) services under RCM vide challan dated 11.06.2018 along with interest of Rs. 72,223/- vide challan dated 13.06.2018. The appellant disputed the other liabilities raised in the notice.
2.4. The proceedings culminated into an Order-in- Original dated 31.12.2018, which dropped the demand relating to eligibility of CENVAT Credit to the tune of Rs. 1,24,384/- and appropriated the amount of service tax discharged towards Service tax on legal consultancy service & GTA services, while confirming the interest thereon. As regards the balance demand, the Ld. Adjudicating Authority upheld the demand of Service tax.
2.5. On appeal, the Ld. Commissioner (Appeals) upheld the demands confirmed and rejected the appeal filed by the appellant vide impugned order dated 02.09.2020. Aggrieved against the impugned order confirming the demands, the appellant has filed this appeal. 02.09.2020
3. Regarding the demand of service tax of Rs.56,159/- on Sale of sweet boxes, the appellant submits that the Ld. adjudicating authority has considered the said sale as Supply of sweet boxes falls under the category of outdoor catering service as per Rule 2C of Service Tax (Determination of Value) Rules, 2006. The Appellant submits that the Ld. adjudicating authority took this view as they were registered as outdoor catering service providers. Thus, sale of sweet boxes at various locations has been considered as taxable service and service tax has been confirmed on 60% of total amount as service portion.
ST Appeal No.75445 of 20203.1. In this regard, the Appellant submits that the supply of sweet boxes is a transaction of sale of goods and no element of service is involved in the said transaction. The dominant nature of the transaction was sale only, and no services, amenities etc. were offered to the customers along with the sale of sweet boxes. The mere fact that the Appellant is registered as an outdoor catering service provider cannot lead to the conclusion that all transactions undertaken by them would be taxable under outdoor catering service.The Appellant submits that the entire demand is based on a superficial understanding of the department. The appellant submitted a copy of the sample invoices issued in this regard.
3.2. In support of their contention that no service tax is payable on a transaction which is considered as a 'sale', the appellant placed their reliance on the following rulings:
Tamil Nadu Kalyana Mandapam Assn. Versus Union Of India - 2004 (4) TMI 1 - Supreme Co Hotel Priya v. Commissioner 2018 (9) TMI 1663
- CESTAT CHENNAI 3.3. In view of the above, it is submitted that the sale of food items without any accompanying services does not constitute outdoor catering service.
Therefore, the demand of service tax confirmed in the impugned Order on this count is liable to be set aside.
4. Regarding the demand of service tax of Rs.1,11,250/-confirmed under reverse charge on the Legal services received from Mr. Ashwini Kumar Roy, the appellant submits that they have already ST Appeal No.75445 of 2020 paid the said amount vide challan dated 11.06.2018 and the same has also been appropriated along with interest in the Order-in-Original by the adjudicating authority.
5. Regarding the demand of service tax of Rs. 87,391/- confirmed under reverse charge on the GTA services received during the period, the appellant submits that they have already paid the said amount vide challan dated 11.06.2018 and the same has been appropriated along with interest in the Order-in-Original by the adjudicating authority.
6. Regarding the demand of service tax of Rs. 2,94,808/- confirmed under the category of Manpower supply services received from various service providers, the appellant submits that the demand of Rs. 26,250/- on Bhuwan Suhay/Hari Om Sharma has been dropped by the adjudicating authority. In respect of manpower supply services received from M/s Sonu Services, the appellant submits that service tax has already been charged in the invoices raised by them and paid by the Appellant. Once the service provider has charged and collected service tax, which has been paid by the recipient and deposited with the Government exchequer, demanding the same tax again from the recipient under RCM would amount to double taxation.
6.1. In support of the above view, the appellant placed their reliance on the following rulings:
(i) Gurudev Dyestuff India Pvt. Ltd. v. Principal Commissioner, CGST, Customs & CE - CESTAT Ahmedabad 2024 (10) TMI 10 - CESTAT Ahmedabad.ST Appeal No.75445 of 2020
(ii) Kerala Ceramics Ltd. v. CCE 2024 (5) TMI 868 - CESTAT Bangalore .
6.2. The appellant also submits that CBEC has clarified the issue vide Letter F. No. 341/18/2004- TRU (Pt.), dated 17-12-2004, wherein it has been stated that if Service Tax on transportation has been paid by one person, it should not be charged from another person to avoid double taxation. The Revenue's approach of mechanically seeking tax once the same has already been discharged by the Service provider is legally flawed and contrary to established jurisprudence. Thus, the appellant submits that the demand of service tax confirmed in the impugned Order on this count is liable to be set aside.
7. Regarding the demand of service tax of Rs 19,08,000/- confirmed on the remuneration paid to Four directors, the appellant submits that it has been alleged in the impugned order that they were not full-time employees of the company; the Directors were also working in other companies; the Remuneration has been paid as professional fee for services rendered. Accordingly, it has been held that the remuneration paid to Directors are taxable under RCM as per Notification No. 30/2012-ST.
7.1. The Appellant submits that remuneration has been paid to the directors as salary and on such amount TDS was also deducted under the salary head Unser section 192 of the Income Tax Act, 1961& Form 16 was being issued to such directors. In view thereof, it is submitted that the service provided by Director as an employee to the employer is not liable to pay service tax as per Section 65B (44) of the Finance Act, 1994.
ST Appeal No.75445 of 20207.2. As per the above sub clause (b) of sub- Section (44) of Section 65 of Finance Act, 1994, it is clear that provision of any service by an employee to the employer in case of his employment does not fall under the definition of service. As per the facts in the present case, the Directors to whom the salary was paid by the appellant are employees of the Company. The Directors in the capacity of employees provided service to the employer i.e. present appellant Company. Therefore, the service whatsoever provided by the Directors to the appellant is in the course of their employment with the appellant Company. Hence, the same is out of the purview of service in terms of Section 65B(44)
(b) of the Finance Act, 1994.
7.3. Moreover, the appellant have also booked the payment made to the Directors as salary in their books of accounts and the same has been accepted by the Income Tax department. The TDS was also deducted under the head salary under Section 192 of the Income Tax Act. All these facts go on to prove that the considerations paid to the Directors are in course of employment of the Directors. Therefore, the same is not taxable being not a service as per definition of service under Section 65B(44) of the Finance Act, 1994.
7.4. The appellant further relied on the CBEC Circular No. 115/9/2009-ST dated 31.07.2009, wherein it has been clarified that any salary paid to the Directors of the Company is outside the scope of service, and hence service tax would not be leviable on such amount. This Circular is binding on the departmental authorities therefore, the demand of ST Appeal No.75445 of 2020 service tax confirmed in the impugned order on this count is not sustainable.
7.5. Further, the appellant submits that Mr. Yash and Mr. Arnish were functioning as Executive Directors in the Appellant Company, contributing to the day-to-day management and operational control. Their holding non-executive positions in Multiflora Company does not negate their employment status in Neelamber, where they performed executive roles. Similarly, Ms. Laxmi Singh and Mr. Dipak Kumar Singh, while being non-executive directors in Kanak Land Company, and were treated as employees of the Appellant Company, where the disputed services were rendered. Thus, the Department's contention that holding positions in other companies negates full-time employment is misconceived. It is well- settled that holding a non-executive directorship elsewhere does not preclude a person from being a full-time executive director and employee in another company, especially when actual executive functions and employment remuneration exist. Therefore, the Revenue's approach of mechanically invoking service tax merely based on dual appointments, without appreciating the actual nature of engagement (executive vs. non-executive) and without rebutting the salary and TDS documentation, is contrary to law and binding departmental clarifications. 7.6. Reliance in this regard is placed on the following rulings:
o Amara Raja batteries v.
Commissioner (2024) 21 Centax 216 (Tri.-Hyd) ST Appeal No.75445 of 2020 o Power Mech Projects Ltd. v.
Commissioner 2025 (3) TMI 965 - CESTAT Hyderabad o Allied Blenders & Distillers Pvt.
Ltd. v. Commissioner2019 (24) G.S.T.L. 207 (Tri. - Mumbai) o Lalitha Chem Industries Ltd. v.
Commissioner 2024 (11) TMI 1185 - CESTAT Ahmedabad o Maithan Alloys Ltd v.
Commissioner of C.Ex & ST, Bolpur [2019 (4) TMI 1595 -
CESTAT KOLKATA] 7.7. Thus, the demand of service tax under reverse charge mechanism on amounts paid as salary to the four directors, where TDS has been duly deducted under Section 192 and Form 16 issued, is unsustainable and the impugned order is liable to be set aside on this ground also.
8. That the Appellant further submits that the CENVAT Credit availed by it is duly admissible. CENVAT Credit of the invoices raised by M/s Anandlok Welfare Association is duly eligible thereto. The Appellant categorically submits that the CENVAT credit of Rs.21,250/- was availed on invoices raised by M/s Anandlok Welfare Association for maintenance services provided in respect of the flat owned by the Appellant at 227, AJC Bose Road, Kolkata-700020.The said property is given on rent to M/s Corporation Bank for which the Appellant pays service tax as a provider of renting of immovable property service. The department has not disputed payment of Service tax on the said property or ST Appeal No.75445 of 2020 refunded the same, even though the address is different than that of the Appellant's registration. However, at the time of availment of credit, the department has adopted two different yardsticks - denied credit on the address wherefrom the services were provided for and service tax was appropriately paid. Further, it is undisputed that the input services were received by the Appellant in the course or furtherance of its renting an immovable property business. Hence, there is no violation of Rule 9of CENVAT Credit Rules, 2004. Reliance in this regard is placed on Figment Global Solutions P. Ltd. v. Commissioner 2025 (4) TMI 1189 - CESTAT Mumbai. The impugned order is liable to be set aside on this ground also.
8.1. Without prejudice, the Order denying credit on basis of non-registration of the premises from where the renting service was provided , and consequently, no Service tax was paid is not sustainable as it was a procedural but curable irregularity. Reliance in this regard is placed on Shalimar Paints Ltd. v. Commissioner (2024) 22 Centax 384 (Tri.-Cal).
Concast Steel & Power Ltd. v. Commissioner (2024) 24 Centax 113 (Tri.-Cal) 8.2. Regarding the demand for reversal of Cenvat credit of Rs.2,94,809/- on the ground that service tax was not paid by M/s Sonu Services under RCM, the appellant submits that the stand of the department is also unsustainable as once duty/tax is paid, CENVAT credit is available whether service tax is paid by service provider or recipient. Reliance in this regard is placed on the ruling in the case of Srini Link v. Commissioner [Final Order No. A/ ST Appeal No.75445 of 2020 11246 /2022 dated 19.10.2022] - CESTAT Ahmedabad.
8.3. Accordingly, the appellant submitted that the demand confirmed on this count is liable to be set aside.
9. The Ld. A.R reiterated the findings in the impugned order.
10. heard both sides and perused the appeal documents.
11. Regarding the demand of service tax Rs.56,159/- confirmed on the sale of sweet boxes, I find that the supply of sweet boxes is a transaction of sale of goods and no element of service involved in the said transaction. The dominant nature of the transaction was sale only, and no services, amenities etc. were offered to the customers along with the sale of sweet boxes. The mere fact that the Appellant is registered as an outdoor catering service provider cannot be the reason to conclude that all transactions undertaken by them would be taxable under outdoor catering service. I find that when the sweet boxes were delivered as per customer order, It is a sale of goods and the said transaction cannot be treated as outdoor catering service simply because the seller is registered under that category. I have perused the copy of the sample invoices submitted by the appellant. The invoices clearly indicate that the transaction was a sale. Accordingly, I hold that no service tax is liable to be paid on a transaction which is a pure 'sale'.
11.1. I find that this view has been taken by the Tribunal Chennai in the case of Hotel Priya v. Commissioner 2018 (9) TMI 1663 - CESTAT ST Appeal No.75445 of 2020 CHENNAI. The relevant portion of the said decision is reproduced below:
"6. For better appreciation, the definition of outdoor caterer service under section 76(a) is reproduced as under-
"caterer means a caterer engaged in providing services in connection with catering at a place other than his own (but including a place provided by way of tenancy or otherwise by the person receiving such services"
6.1 The main contention put forward by the Id. counsel for the appellant is that the activity is only sale of foods involving delivery at the premises of M/s. Mitsubishi, It is also stated by them in their reply to the show cause notice that M/s. Mitsubishi has engaged casual labourers for serving food to the employees/workers. In fact, the original authority has held the activity to be outdoor catering service for the mere reason that the brother of the appellant R. Suresh or some other worker of the hotel also go to the company to oversee the activity. The department is of the view that since some person from the hotel goes to the company the activity falls within the definition of outdoor catering. The original authority does not mention what is the overseeing activity done by the brother of the appellant. If one person goes to the premises of the company to check whether the food is sufficient, it can be ST Appeal No.75445 of 2020 overseeing the activity of sale of food. But this cannot be considered as catering to the service of the customer. In the decision of Tamilnadu Kalyana Mandapam Association (supra), the Hon'ble Supreme Court had occasion to consider the difference between the service rendered by outdoor caterer and the service rendered in a restaurant/hotel. The Hon'ble Supreme Court observed as under:-
"55. In fact, mandap-keepers provide a wide variety of services apart from the service of allowing temporary occupation of mandap. As per Section 65(19) of the Finance Act, 1994, Mandap means any immovable property as defined in Section 3 of the Transfer of Property Act, 1882 and includes any furniture, fixture, light fittings and floor coverings therein let out for consideration for organising any official, social or business function. A mandap-keeper apart from proper maintenance of the mandap, also provides the necessary paraphernalia for holding such functions, apart from providing the conditions and ambience which are required by the customer such as providing the lighting arrangements, furniture and fixtures, floor coverings etc. The services provided by him cover method and manner of decorating and organising the mandap. The mandap- keeper provides the customer with advice as to what should be the quantum and quality of the services required keeping in view of the requirement of the ST Appeal No.75445 of 2020 customer, the nature of the event to be solemnized etc. In fact the logistics of setting up, selection and maintenance is the responsibility of the mandap-keeper. The services of the mandap-keeper cannot possibly be termed as a hire purchase agreement of a right to use goods or property. The services provided by a mandap-keeper are professional services which he alone by virtue of his experience has the wherewithal to provide. A customer goes to a mandap- keeper, say a star hotel, not merely for the food that they will provide but for the entire variety of services provided therein which result in providing the function to be solemnized with the required effect and ambience. Similarly the services rendered by out door caterers is clearly distinguishable from the service rendered in a restaurant or hotel inasmuch as, in the case of outdoor catering service the food/eatables/drinks are the choice of the person who partakes the services. He is free to choose the kind, quantum and manner in which the food is to be served. But in the case of restaurant, the customer's choice of foods is limited to the menu card. Again in the case of outdoor catering, customer is at liberty to choose the time and place where the food is to be served. In the case of an outdoor caterer, the customer negotiates each element of the catering service, including the price to be ST Appeal No.75445 of 2020 paid to the caterer. Outdoor catering has an element of personalized service provided to the customer. Clearly the service element is more weighty, visible and predominant in the case of outdoor catering. It cannot be considered as a case of sale of food and drink as in restaurant.Though the Service Tax is leviable on the gross amount charged by the mandap-keeper for services in relation to the use of a mandap and also on the charges for catering, the Government has decided to charge the same only on 60% of the gross amount charged by the mandap-keeper to the customer."
6.2 Thus, the element personalized service is involved in outdoor catering. In the present case, it is very much clear from the facts that the appellant is merely delivering the food to the company and there is no service element involved. The decision in the case of Ambedkar Institute of Hotel Management (supra) has considered a similar issue, wherein it was observed as under:-
"6. We have considered the submissions of both the sides and perused the record. From the facts stated in the show cause notice as well as in the order-in-original, it is seen that the appellant are preparing the meals as per the fixed menu which are to be served in various schools of Chandigarh Administration under the Mid Day Meal Scheme of the Government.ST Appeal No.75445 of 2020
Neither there is any allegation nor there is any evidence to show that the appellant had prepared the meals at the schools where the same were to be served or were in any manner involved in serving the meals. Meals prepared by them are simply supplied at the pre-
determined rates to Education
Department. The service which is
covered under Section 65(105)(zzt) is the service provided or to be provided to any person by an "outdoor caterer" and not by any caterer. The outdoor caterer as defined in Section 65(76a) means a caterer engaged in providing services in connection with catering at a place other than his own but including a place provided by way of tenancy or otherwise by the person receiving such services. Since the appellant are preparing mid day meals in their Institute and not in the schools where the meals are served and are not involved in serving of the meals in any manner, in our view they are not covered by the definition of "outdoor caterer" and hence their activity of preparing and supplying meals for mid day scheme would not be covered by the definition of taxable service under Section 65(106(zzt) Accordingly the duty demand on this count would not be sustainable."
7. From the discussions made above and also from the facts presented before us, we are of the considered opinion that the activity does ST Appeal No.75445 of 2020 not fall within the definition of outdoor catering service. The demand therefore cannot sustain. The impugned order is set aside and the appeal is allowed with consequential relief, if any."
11.2. In view of the above findings, I hold that the demand of service tax Rs.56,159/- confirmed on the sale of sweet boxes is not sustainable and hence I set aside the same.
12. Regarding the demand of service tax of Rs. 2,94,808/- confirmed under the category of Manpower supply services received from various providers, I find that the impugned order has confirmed the demand of service tax in respect of the services received from M/s Sonu Services. In this regard, the appellant submitted that M/s Sonu Services has already collected service tax in the invoices raised by them and deposited the same with the Government exchequer. From the evidences submitted by the appellant, I find that service tax has been collected and paid by the service provider M/s. Sonu Services, even though legally service receiver is liable to pay service tax on RCM basis. On such services. However, I observe that demanding service tax again from the recipient under RCM would amount to double taxation. This view has been held by Tribunal Bangalore in the case of Kerala Ceramics Ltd. v. CCE 2024 (5) TMI 868 - CESTAT Bangalore. The relevant portion of the said decision is reproduced below:
6. We find that as per the letter furnished by M/s. Devi Transporters, they have certified that they have not availed any credit under Cenvat Credit Rules for providing the Goods Transport ST Appeal No.75445 of 2020 Service to the appellant and no deduction is claimed for cost of goods used in the rendering services. Similarly as evidenced from letter issued by M/s. Ayoob & Co., they also have not availed any Cenvat Credit and no deduction was claimed for cost of goods used in rendering the services.
7. We find that the claim of the appellant is that once the transporter had paid some amount of service tax, it can be adjusted towards the tax liability of the appellant. The issue was considered by the Tribunal in the matter Navyug Alloys Pvt. Ltd. Vs. Commr. of C.Ex. & Cus., Vadodara-ll 2009 (13) S.T.R.421 (Tri.-Ahmd.), where on similar facts and circumstances, the Tribunal held that once tax is already paid on the service, it is not open to the department to confirm the same against the appellant Similarly in the matter of M/s.
Agniplast Pvt. Ltd., 2013 (32) S.T.R.628 (Tri.- Ahmd) where it is held that:-
8. On perusal of the records, I find that there is no dispute that the amount of Service Tax liability which is contested before the Bench is in respect of the services rendered by M/s. Naranji Peraj Transport Co., M/s. Pathik Roadlines and Transport Corporation of India Ltd. On perusal of the certificates issued by these transport companies, as annexed page Nos. 36, 37 & 38, I find that these transporters have categorically stated that the Service Tax liability for the invoices raised on the appellant has been ST Appeal No.75445 of 2020 discharged by them and they had also mentioned their Service Tax registration number and PAN number in their certificates. As against such documentary evidences, the first appellate authority's findings as to no authentic documentary evidence has been produced, seems to be incorrect. Since the certificates clearly indicate the Service Tax registration number, the least that could have been expected from the Revenue, was to call for the details from the concerned jurisdictional Service Tax authorities.
Having not done, the lower authorities cannot shift the entire blame on the appellants for having not produced any authentic documentary evidence.
9. I find that the decision of this Bench in the cases Navyug Alloys Pvt. Ltd.
(supra), Mandev Tubes (supra) and Geeta Industries Pvt. Ltd. (supra) will squarely cover the issue in favour of the assessee. I also find that CBEC vide Circular dated 17-12-2004, specifically in para 5.7 stated that; "If Service Tax due on transportation of a consignment has been paid or is payable by a person liable to pay Service Tax, Service Tax should not be charged for the same amount from any other person, to avoid double taxation."
8. Considering the facts and circumstances of the case, and the decisions of the Tribunal the ST Appeal No.75445 of 2020 appeal is allowed with consequential relief, if any in accordance with law."
12.1. Thus, by relying on the decision cited supra, I hold that service tax cannot be demanded again from the appellant under RCM, as the service tax in this case has already been paid by the service provider M/s. Sonu Services. Thus, I hold that the demand of service tax confirmed in the impugned order on this count is not sustainable and hence I set aside the same.
13. Regarding the demand of service tax of Rs 19,08,000/- confirmed on the remuneration paid to Four directors, the remuneration has been paid to the directors as salary and on such amount TDS was also deducted under the salary head under section 192 of the Income Tax Act, 1961& Form 16 was being issued to such directors. I observe that the service provided by Director as an employee to the employer is not liable to pay service tax as per Section 65B (44) of the Finance Act, 1994. As per the sub clause (b) of sub-Section (44) of Section 65 of Finance Act, 1994, it is clear that provision of any service by an employee to the employer during the course of his employment does not fall under the definition of service. In the present case, I find that the Directors to whom the salary was paid by the appellant are employees of the Company. Thus, I find that the Directors, in the capacity of employees provided service to the employer i.e. present appellant Company. Therefore, I hold that the service provided by the Directors to the appellant Company, is in the course of their employment is out of the purview of service in terms of Section 65B(44)
(b) of the Finance Act, 1994.
ST Appeal No.75445 of 202013.1. I also find that CBEC has clarified the issue vide Circular No. 115/9/2009-ST dated 31.07.2009, wherein it has been clarified that any salary paid to the Directors of the Company is outside the scope of service. For ready reference, the relevant clarification issued by Board is reproduced below:
"Below mentioned issues have been referred to the Board seeking clarifications,-
(i) applicability of service tax under 'Business Auxiliary service' on commission paid to Managing Director / Directors (whole time, or Independent) by the company,
(ii) applicability of service tax on Independent Directors who are part of the Board of Directors under 'Management Consultant service'.
2. Both the matters have been examined by the Board and the clarifications are as under, -
(i) Some Companies make payments to Managing Director/Directors (Whole-time or Independent), terming the same as 'Commissions'. The said amount paid by a company to their Managing Director/Directors (Whole-time or Independent) even if termed as commission, is not the 'commission' that is within the scope of business auxiliary service and hence service tax would not be leviable on such amount.
(ii) The Managing Director / Directors (Whole-time or Independent) being part of Board of Directors perform management function and they do not perform consultancy or advisory function. The definition of management consultant service makes it clear that what is envisaged from a consultant is advisory service and not the actual performance of the management function. The payments made by Companies, to Directors cannot be termed as payments for providing management consultancy service. Therefore, it is clarified that the amount paid to Directors (Whole-time or Independent) is not chargeable to service tax under the category 'Management Consultancy service'. However, in case such directors provide any advice or consultancy to the company, for which they are being compensated separately, such service would become chargeable to service tax.
ST Appeal No.75445 of 20203. In view of the above, it is clarified that remunerations paid to Managing Director / Directors of companies whether whole-time or independent when being compensated for their performance as Managing Director/Directors would not be liable to service tax.
Pending issues may be resolved in line with the above."
13.2. In view of the above, I observe that any salary paid to the Directors of the Company for the service rendered by him as an employee of the company, is outside the scope of service, Hence, I hold that no service tax would be leviable on such amount. This issue has also been clarified by the Board Circular dated 31.07.2009, which is binding on the departmental authorities. Therefore, I hold that the demand of service tax on this count is not sustainable and hence I set aside the same.
14. Regarding the disallowance of CENVAT Credit of Rs.21,250/- availed by the appellant on the invoices raised by M/s Anandlok Welfare Association, I find that CENVAT the said Association has raised the invoices for maintenance services provided in respect of the flat owned by the Appellant at 227, AJC Bose Road, Kolkata-700020. The said property is given on rent to M/s Corporation Bank for which the Appellant pays service tax as a provider of renting of immovable property service. I find that the department has not disputed payment of Service tax on the said property even though the address is different than that of the Appellant's registration. However, at the time of availment of credit, the department has denied the credit on the ground that the address wherefrom the services were provided is different. In this regard, I find that the input services were received by the Appellant in the course or furtherance of its renting an immovable property ST Appeal No.75445 of 2020 business. Hence, I hold that there is no violation of Rule 9 of CENVAT Credit Rules, 2004. Thus, I hold that the appellant is eligible for the credit availed by them on the basis of the said invoices and hence I set aside the impugned order dialling the Cenvat credit on the above ground.
14.1. Regarding the demand for reversal of Cenvat credit of Rs.2,94,809/-, I find that the the impugned order has disallowed the credit on the ground that service tax was not paid by M/s Sonu Services under RCM. In this regard, I find that the stand of the department is not sustainable. Once service tax is paid and the appellant has received it proper invoice evidencing payment of the tax, CENVAT credit is available whether service tax is paid by service provider or recipient. In support of this view, I rely on the decision in the case of Srini Link v. Commissioner [Final Order No. A/ 11246 /2022 dated 19.10.2022] - CESTAT Ahmedabad.
15. Regarding the penalties imposed on the appellant, I find that penalties have been imposed as the appellant has not paid service tax on certain services. Also, some Cenvat credit availed by the appellant has been disallowed as irregular. In view of the above findings, the demand of service tax has not sustained and the same has been set aside. The Cenvat credit availed has also been held as eligible. Thus, I hold that no penalty imposable on the appellant as the demands have been set aside.
16. In view of the above findings, I pass the following order:
(i) I hold that the demand of service tax Rs.56,159/-
confirmed on the sale of sweet boxes is not sustainable and hence I set aside the same.
ST Appeal No.75445 of 2020(ii) The demand of service tax of Rs. 2,94,808/- confirmed under the category of Manpower supply services is set aside.
(iii) The demand of service tax of Rs 19,08,000/- confirmed on the remuneration paid to Four directors, is set aside.
(iv) The disallowance of CENVAT Credit of Rs.21,250/- availed by the appellant on the invoices raised by M/s Anandlok Welfare Association, is set aside.
(v) The demand for reversal of Cenvat credit of Rs.2,94,809/- is not sustainable and hence the same is set aside.
(Vi) All penalties imposed on the appellant is set aside.
(Vii) The appeal filed by the appellant is disposed of on the above terms.
(Order Pronounced in Open court on 22.07.2025) (K. ANPAZHAKAN) MEMBER (TECHNICAL) RKP