Tribunal rules against service tax under RCM on already taxed services, exempts director's salary from service tax.
In a significant ruling, the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) Eastern Zonal Bench, Kolkata, has quashed the service tax demands against M/s. Neelamber Caterers Private Limited. The tribunal's decision, dated September 10, 2025, addresses issues of double taxation under the Reverse Charge Mechanism (RCM) and the applicability of service tax on director's remuneration.
The appellant, represented by Advocate Shri Rishi Raju, challenged the order of the Commissioner of C.G.S.T. and Central Excise which confirmed a service tax demand of Rs. 2,84,411/-. The issue arose from the service tax on manpower supply services from M/s Sonu Services and remuneration paid to directors, claimed by the department under RCM.
The tribunal highlighted that demanding service tax again under RCM from the service recipient, when the service provider has already paid it, constitutes impermissible double taxation. It cited previous precedents and CBEC Circular dated 17-12-2004, emphasizing that service tax should not be collected twice for the same service amount.
Furthermore, the tribunal addressed the demand for service tax on remuneration paid to directors. It clarified that when such remuneration is treated as salary and subject to TDS under Section 192 of the Income Tax Act, it falls outside the purview of service tax. The judgment reiterated that services rendered by directors as employees are excluded from the definition of 'service' under Section 65B(44) of the Finance Act, 1994, aligning with CBEC's clarification dated 31.07.2009.
In addition, the tribunal ruled in favor of Neelamber Caterers regarding the reversal of CENVAT Credit on invoices from M/s Sonu Services. It held that CENVAT credit is permissible when service tax is paid, and proper invoices are furnished, irrespective of whether the tax is paid by the provider or recipient.
The tribunal's decision, penned by Member (Technical) Shri K. Anpazhakan, follows its earlier ruling in the appellant's favor for a preceding period, reinforcing the consistency of its stance on such matters. The judgment offers consequential relief to Neelamber Caterers, setting aside the impugned order and eliminating related interest and penalties.
Bottom Line:
Service Tax - Double taxation under Reverse Charge Mechanism (RCM) is not permissible if service tax has already been paid by the service provider. Further, remuneration paid to Directors as salary, subject to TDS under Section 192 of the Income Tax Act, 1961, is outside the purview of service tax under Section 65B(44) of the Finance Act, 1994.
Statutory provision(s):
- Section 65B(44) of the Finance Act, 1994
- Section 192 of the Income Tax Act, 1961
- CBEC Circular dated 17-12-2004
- CBEC Circular dated 31.07.2009
