Service tax on miss income

This query is : Resolved

SACHIN (Querist)
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24 September 2015 R/Sir,
During the Service Tax Audit , auditor has raised demand of service tax on Income received and booked under account head is receipt from employee against notice period and unclaimed security deposited transferred to Misc. Income.

Notice period receipt is the money which is received from employee resigned from company and pay money against bond period or short of notice period. Unclaimed security deposit income is against such cases where security is deposited by vendor against works contract and remain unclaimed for three years after completion of the contract and transferred to misc. income.

The auditor mention that “In this regard , your attention is invited towards the provisions of section 66E of the Finance Act ,1994 where in “declared service’’ have been defined and its sub section (e) provides “agreeing to the obligation to refrain from an act or to toleration for a consideration shell constitute as declared service. Thus , when an employees intended to leave the organization, rather than serving the stipulated advance notice period, the act of toleration of this activity of the employee for a consideration would qualify as ‘’declared service ‘’ in terms of Section 66E (e) of finance Act, 1994 and service tax from July 2012.”
Auditor has asked BHEL to deposit Service tax as applicable, along with interest and due penalty is to be paid immediately.
It is requested to kindly examine and offer your comment whether service tax is applicable under declared services on Misc. Income booked on account of Notice period and security deposit transferred to income.