Page 189 - GSTL_2nd April 2020_Vol 35_Part 1

2020 ] GE T & D INDIA LIMITED v. DEPUTY COMMISSIONER OF C. EX., CHENNAI 91
(d) development, design, programming, customisation, adapta-
tion, upgradation, enhancement, implementation of infor-
mation technology software;
(e) agreeing to the obligation to refrain from an act, or to tolerate
an act or a situation, or to do an act;
7. According to the Revenue, payment in lieu of notice constitutes
payment to an employee by the employer for the notice period or vice versa
where the employer/employee desires an immediate exit from the organization.
8. This arrangement, the Revenue argues, would attract the provisions
of Section 66E(e), whereby agreement by an entity to the obligation to refrain
from an act or to tolerate an act or a situation, or to do not act, would constitute
taxable service. According to the respondent, the petitioner has tolerated the act
of immediate quitting from service, by the employees and such agree-
ment/toleration results in the rendition of a taxable service.
9. Heard Mr. Joseph Prabhakar, Learned Counsel for the petitioner and
Mr. A.P. Srinivas, Learned Senior Standing Counsel for the petitioner.
10. The provisions of Section 66E(e) appear to have given rise to some
ambiguity, on this very issue, clarified by the Central Board of Excise and Cus-
toms (C.B.E. & C.) in C.B.E. & C.s’ Guidance Notes dated 20-6-2012. At para 2.9.3
the Board states as follows :
2.9 Provision of service by an employee to the employer is outside the ambit
of service.
2.9.3. Would amounts received by an employee from the employer on prem-
ature termination of contract of employment be chargable to service tax?
No. Such amounts paid by the employer to the employee for prema-
ture termination of a contract of employment are treatable as amounts paid
in relation to services provided by the employee to the employer in the
course of employment. Hence, amounts so paid would [not] be chargeable
to service tax. However any amount paid for not joining a competing busi-
ness would be liable to be taxed being paid for providing the service of for-
bearance to act.
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 sudden exit upon be-
ing 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 non-compete.
Notice pay, in lieu of sudden termination however, does not give rise to the ren-
dition of service either by the employer or the employee.
13. Towards conclusion Mr. Srinivas, Counsel raises the plea of availa-
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