I. TRIBUNAL
8. [2020-TIOL-1626-CESTAT-Kol.] Bengal Beverages Pvt. Ltd. vs. CGST and CE Date of order: 9th October, 2020
A whole-time
director is an employee of the company. Merely because the director is
compensated by a variable pay the same does not alter the employer-employee
relationship
FACTS
The Department has raised a
demand of service tax under reverse charge mechanism on the entire remuneration
paid to the whole-time directors, on both the fixed part as well as the
variable pay, in terms of Notification No. 30/2012-Service Tax dated 20th June,
2012. The case of the Department is that the remuneration paid to the directors
would constitute ‘service’ liable to service tax in their hands and the
assessee is required to discharge tax under reverse charge mechanism. Aggrieved
by the decision of the lower authority, the present appeal was filed.
HELD
The Tribunal primarily
noted that the only dispute is on payment of remuneration in the nature and
form of commission based on percentage of profit to whole-time directors, which
is a fact on record. Section 2(94) of the Companies Act, 2013 duly defines ‘whole-time
director’ to include a director in the whole-time employment of the company. A
whole-time director refers to one who has been in the employment of the company
on a full-time basis and is also entitled to receive remuneration. The
certificate issued by the Company Secretary states that the remuneration is
given in various forms as allowed under the Companies Act, 2013. Moreover, a
whole-time director is considered and recognised as a ‘key managerial
personnel’ u/s 2(51) of the Companies Act. Further, he is an officer in default
for any violation or non-compliance of the provisions of the Companies Act.
Thus, the whole-time
director is essentially an employee of the company and whatever remuneration is
being paid in conformity with the provisions of the Companies Act is pursuant
to the employer-employee relationship; the mere fact that the whole-time
director is compensated by way of variable pay will not in any manner alter or
dilute the position of the employer-employee relation between the company and
the whole-time director. Thus, the appellant is not required to discharge tax
under reverse charge.
9. [2020-TIOL-1603-CESTAT-Del.] M/s Sir Ganga Ram Hospital vs. Commissioner
of Service Tax Date of order: 2nd September, 2020
The
facilitation fee retained from the fees payable to the consultant doctors is a
part of healthcare services and cannot be taxed separately as business support
services
FACTS
The appellant provides
various categories of healthcare services to its patients and for this purpose
has appointed professionals / doctors / consultants on contractual basis. The
doctors were given designated space in the hospital premises in the form of
chambers with an examination table for examining the patients coming to the
hospital. The professional fee was paid after retaining the facilitation fee.
The Department alleges that the ‘collection charges’ / ‘facilitation fee’
retained should be subjected to service tax as it was rendering infrastructural
support services to the doctors which was an activity taxable under the
category of ‘business support services’.
HELD
The
Tribunal placed reliance on the appellant’s own case reported in 2018-TIOL-352-CESTAT-Del.
where it has been categorically held that the view of the Revenue that in spite
of exemption available to healthcare services, a part of the consideration
received for such services from the patients shall be taxed as business support
service is not tenable. In effect, this will defeat the exemption provided to
the healthcare services by clinical establishments.
Admittedly, the
healthcare services are provided by the clinical establishments by engaging
consultant doctors. For such services, an amount is collected from the
patients. The same is shared by the clinical establishment with the doctors.
There is no legal justification to tax the share of the clinical establishment
on the ground that they have supported the commerce or business of doctors by
providing infrastructure. Thus, the demand is set aside and the appeal is
allowed.
