2014 (1) TMI 145 - AT - Service Tax

Demand of service tax - Manpower supply service - Parent company sent a few of their employees to the appellant-company for managing the affairs of the appellant-company - Held that - prima facie the persons are employees of the appellant-company during the relevant time and they are being paid. Routing part payment through parent company by itself may not make it a case of manpower supply. Further we note that in another case where payment of staff was being made through the parent company of the employee without involving any additional consideration being paid to the parent company, stay petition was allowed for hearing the appeal without pre-deposit - Stay granted.

Summary

Issues:
Taxability of payments made to employees through parent company as "manpower supply service"

Analysis:
The case involves a subsidiary company where the parent company sent employees to manage affairs. The Revenue seeks to tax payments made to these employees through the parent company as "manpower supply service." The appellant argues that the parent company is not receiving consideration, and the payments were for the benefit of the employees and their families. The appellant contends that the employees were working for the local company and the payments were not for manpower supply services. Reference is made to a Circular clarifying that where an employer-employee relationship exists, it does not constitute manpower supply. The appellant asserts that the parent company is not engaged in supplying manpower professionally.

The Revenue relies on a Tribunal decision stating that deputation of staff falls under "Manpower Recruitment or Supply Agency Service" and requires a pre-deposit. However, the Tribunal notes the Circular and decides that a detailed examination is needed. It observes that the employees were of the appellant-company during the relevant time and were being paid. Merely routing payments through the parent company may not constitute manpower supply. The Tribunal also mentions a previous case where payment through the parent company without additional consideration led to a waiver of pre-deposit. Consequently, the Tribunal waives the pre-deposit in this case and grants a stay on the collection of dues pending the appeal.

In conclusion, the Tribunal grants the pre-deposit of dues for admission of the appeal and stays the collection of such dues during the appeal's pendency. The decision emphasizes the need for a detailed examination in cases involving payments to employees through a parent company to determine taxability under "manpower supply service."