2016 (7) TMI 1209 - AT - Service Tax

Export of services or not - place of performance is in India - Business Auxiliary Service (BAS) and Business Support Service - services were provided to foreign customers - manpower recruitment or supply agency service - Held that - when the person on whose instructions the services, in question, has been provided and is located abroad, the destination of services, in question, has to be treated abroad. The destination has to be decided on the basis of place of consumption, not the place of performance of service in case of Business Auxiliary Service - the impugned order regarding service tax liability of the appellant on these services is not legally sustainable. Regarding manpower recruitment and supply agency service - deputation of employees - Held that - The reimbursement amount paid by the appellant to the foreign companies is relating to the cost of salaries and wages of the employees working under the appellant. In CCE vs. Computer Sciences Corporation India Pvt. Ltd.(2014 (11) TMI 125 - ALLAHABAD HIGH COURT) the Tribunal held that for tax purposes the service provided must be by a manpower recruitment agency and such a service has to be in relation to supply of manpower. In CCE vs. Arvind Mills Ltd. (2014 (4) TMI 132 - GUJARAT HIGH COURT), the Hon ble Gujarat High Court held that deputation of employees from one company to another does not involve profit or finance benefit there is no relationship of agency and client involved in such deputation. In Volkswagen India Pvt. Ltd. vs. CCE (2013 (11) TMI 298 - CESTAT MUMBAI) the Tribunal held when the global employees working under the Indian company are working as their employees and having employee employer relationship there is no supply of manpower service and no tax liability arises. Demand set aside - Decided in favor of assessee.

Summary

Issues:
1. Tax liability under Business Auxiliary Service (BAS) and Business Support Service.
2. Non-payment of service tax under manpower recruitment or supply agency service.

Analysis:

1. Tax liability under Business Auxiliary Service (BAS) and Business Support Service:
The appeal challenged an order by the Commissioner of Central Excise, Delhi II regarding non-payment of service tax under BAS and Business Support Service. The appellant was accused of failing to discharge service tax under BAS for operations in India with foreign companies and non-payment of service tax under manpower recruitment or supply agency service for employees seconded by foreign companies. The Original Authority confirmed the demand and imposed penalties under the Finance Act, 1994. The appellant argued that services were exported, fulfilling Export of Service Rules, 2005 conditions. They cited various Tribunal decisions in their favor and emphasized that services were provided to recipients outside India, justifying no tax liability. The Tribunal agreed, citing legal precedents and the nature of services provided to foreign companies without offices in India.

2. Non-payment of service tax under manpower recruitment or supply agency service:
Regarding the second issue of service tax liability under manpower recruitment or supply agency service, the appellant contended that the foreign companies involved were not manpower supply agencies. They argued that the reimbursement costs for seconded employees did not constitute consideration for services. The Tribunal examined the agreements and found that the employees were under the appellant's control, with all statutory obligations fulfilled by the appellant as the employer. Legal precedents were cited to support the appellant's position, emphasizing the absence of a supply of manpower service. The Tribunal concluded that the impugned order lacked merit, setting it aside and allowing the appeal.

In conclusion, the Tribunal ruled in favor of the appellant, finding no legal basis for the service tax liabilities under BAS and manpower recruitment or supply agency service. The decision highlighted the fulfillment of Export of Service Rules conditions and the absence of a supply of manpower service, leading to the dismissal of the impugned order and allowing the appeal.