2019 (7) TMI 1752 - AT - Service Tax

Interpretation of statute - Manpower recruitment or supply agency service - dispute straddles the pre- negative list and negative list regimes with different meanings assigned to taxable service under the two schemes - HELD THAT - The issue of taxability stands covered by the decision of the Tribunal in Volkswagen India Pvt Ltd v. Commissioner of Central Excise, Pune-I 2013 (11) TMI 298 - CESTAT MUMBAI and that this plea before the original authority had been discarded on the ground that the issue had not attained finality. The only ground cited in the impugned order for discarding the applicability of decision of the Tribunal in re Volkswagen India Pvt Ltd is the apparent lack of finality of the issue decided therein. Even if such justification was offered at that stage, the dismissal of appeal of Revenue would require it to be followed without fail as it has been rendered in identical circumstances - The decision of the Tribunal in re INA Bearings India Pvt Ltd, 2017 (12) TMI 1143 - CESTAT MUMBAI relied upon by Learned Authorised Representative, though having taken note of the submission of relevance of the decision in re Volkswagen India Pvt Ltd, did not take the findings therein into consideration. Accordingly, the later decision does not bind us. In the impugned order, there is no finding on taxability for the period thereafter which should have been determined for conformity with section 65B(44) of Finance Act, 1994 - Furthermore, the very reimbursability of the payments made to the overseas entity has been the basis for discarding the coverage under manpower recruitment or supply agency service and, in the context of the decision of the Hon ble Supreme Court in re Intercontinental Consultants and Technocrats Pvt Ltd 2018 (3) TMI 357 - SUPREME COURT declaring the provisions of rule 5(1) of Service Tax (Determination of Value) Rules, 2006, for addition of reimbursable expenses within gross value , to be ultra vires, the coverage of such remittance within service is not tenable. The demand for the period after 1st July 2012 is also set aside - Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Challenge against demand of tax under sections 73, 75, and 78 of Finance Act, 1994 for the period from October 2009 to March 2014.
- Interpretation of 'taxable service' under pre-'negative list' and 'negative list' regimes.
- Taxability of salaries/cost of employees remitted to foreign associates under 'manpower recruitment and supply agency service.'
- Applicability of Tribunal decisions in similar cases.
- Definition of 'manpower recruitment or supply agency' and 'service' under Finance Act, 1994.
- Consideration of reimbursable expenses in tax liability.
- Finality of Tribunal decisions and Supreme Court rulings on taxability issues.
- Implications of rule 5 of Service Tax Rules, 2006 on reimbursable expenses.
- Conformity with section 65B(44) of Finance Act, 1994 for taxability determination.
- Coverage of remittance within 'service' under the context of Supreme Court ruling.

Analysis:
1. The appeal challenges a tax demand under sections 73, 75, and 78 of the Finance Act, 1994 for the period from October 2009 to March 2014. The dispute involves the interpretation of 'taxable service' under both the pre-'negative list' and 'negative list' regimes, with differing meanings assigned to the term under each scheme.

2. The issue revolves around the taxability of salaries/cost of employees remitted to foreign associates under the category of 'manpower recruitment and supply agency service.' The appellant, part of a global conglomerate, entered into secondment agreements with foreign associates, leading to the demand for tax payment.

3. The appellant argues that the taxability issue is covered by a previous Tribunal decision and a Supreme Court ruling. The Tribunal's decision in a similar case and the Supreme Court's ruling on reimbursable expenses are cited to support the appellant's position.

4. The Authorized Representative relies on the definitions of 'manpower recruitment or supply agency' and 'service' under the Finance Act, 1994 to assert that the deputation of employees by foreign associates falls under taxable services. Previous Tribunal decisions are also referenced to support this argument.

5. The Tribunal's decision in a specific case is highlighted, where it was held that the global employees working under the appellant were considered employees with an employer-employee relationship, leading to the setting aside of the orders-in-original.

6. The Tribunal's decision in another case, not considering the findings of a previous case, is discussed. The relevance of a Supreme Court ruling on reimbursable expenses is emphasized, impacting the determination of tax liability.

7. Decisions cited pertain to the period before the 'negative list' regime. The demand for the pre-'negative list' period is set aside based on the Tribunal's decision in a specific case.

8. The impugned order lacks a finding on taxability for the period after the introduction of the 'negative list' regime. The coverage of deputation of employees under 'manpower recruitment or supply agency service' is questioned, especially post-July 2012.

9. The reimbursability of payments to overseas entities is a crucial factor in determining tax liability. The coverage of such remittances within the scope of 'service' is scrutinized in light of a Supreme Court ruling.

10. Ultimately, the demand for the period after July 2012 is also set aside, and the appeal is allowed based on the above considerations.