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2014 (4) TMI 542 - AT - Service TaxDemand of service tax - Management Consultancy and Business Auxiliary Services - Held that - The major component of the service tax demand in these appeals is under manpower supply service on the payments made by the appellant to their holding company in USA in respect of expatriate employees, who were originally the employee of the holding company based in USA and who have been deputed to the appellant company in India. It is not disputed that their salaries have been paid in India and income tax has also been deducted at source in India. Only the amount payable towards social security in respect of these employees has been paid by the holding company in USA and the same has been reimbursed by the appellant to the holding company in foreign exchange. Just because the social security contribution in respect of the expatriate employees was paid by the holding company, the expatriate employees cannot be treated as the employees of the holding company provided to the appellant company on manpower supply basis - Following decision of Volkswagen India Pvt. Ltd. (2013 (11) TMI 298 - CESTAT MUMBAI) & Paramount Communication Ltd. 2013 (3) TMI 134 - CESTAT NEW DELHI - Decided in favor of assessee.
Issues:
Service tax liability on payments made to holding company for expatriate employees Service tax liability on payments made to Wharton Business School for survey Cenvat Credit demand of Rs.1,58,353/- Analysis: Issue 1: Service tax liability on payments made to holding company for expatriate employees The appellant, a subsidiary of a US-based company, faced service tax demands for payments made to their holding company for expatriate employees deputed to India. The Department alleged that service tax was payable on these payments. The appellant argued that the expatriate employees were essentially their employees, as their salaries were paid in India and income tax was deducted in India. The Tribunal found in favor of the appellant, stating that just because the holding company paid social security contributions for the expatriate employees did not make them employees of the holding company supplied to the appellant on a manpower supply basis. The Tribunal cited previous judgments to support this conclusion and held that the service tax demand on this basis was not sustainable. Issue 2: Service tax liability on payments made to Wharton Business School for survey The appellant also faced service tax demands on payments made to Wharton Business School for a survey conducted regarding the Indian Pharmaceutical Sector. The appellant argued that this activity did not fall under Business Auxiliary Service, and therefore, no service tax was payable on these payments. The Tribunal agreed with the appellant, ruling that the survey conducted with Wharton Business School did not qualify as Business Auxiliary Service. Hence, no service tax liability existed for these payments. Issue 3: Cenvat Credit demand of Rs.1,58,353/- The Cenvat Credit demand of Rs.1,58,353/- was not contested by the appellant. The Tribunal upheld this demand, along with interest and penalty of an equal amount. Judgment Summary: The Tribunal upheld the Cenvat Credit demand of Rs.1,58,353/- with interest and penalty. Regarding the service tax liability on payments made to the holding company for expatriate employees, the Tribunal set aside the demand, stating that the expatriate employees could not be considered as employees of the holding company. Similarly, the Tribunal ruled in favor of the appellant on the service tax liability for payments made to Wharton Business School for the survey, stating that it did not fall under Business Auxiliary Service. The appeal against the order related to this issue was allowed.
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