Recovery of Salary from Employee not Revenue, not liable to Service Tax: CESTAT [Read Order]

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The Allahabad bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), recently held that Recovery of salary from the employee, not revenue hence not come under the provisions of service tax.

The ruling was made by the Tribunal in the case of M/s HCL Learning Limited v. Commissioner of Central Goods & Service Tax, Noida. The bench consisted of Hon’ble Mrs Archana Wadhwa and Hon’ble Mr Anil G. Shakkarwar.

The dispute arose when the employer was served with a show-cause notice demanding service tax from that part of the amount which he recovers out of the salary paid to the employee if the employee breaches the contract of the total term of employment. According to the term of employment if the employee leaves the job before the term is over then a certain amount already paid as salary will be recovered by the employer.

The Revenue argued that the part of the recovery should be treated as consideration for charging service tax.

The Tribunal held that, “the said recovery is out of the salary already paid and we also note that salary is not covered by the provisions of service tax.”

To Read the full text of the Order CLICK HERE