2017 (1) TMI 607 - AT - Service Tax

Deputation of employees - reimbursements of salaries and wages paid to their employees deputed to do the work of the sister concern - whether the service falls under the category of Support Services of Business or Commerce and is taxable or not? - Held that - There is nothing on record to state that the appellant had received any further amount for deputing the employees to sister-concern - similar issue was decided by the Tribunal in the case of Arvind Mills Ltd v. Commissioner of Service Tax, Ahmedabad 2013 (10) TMI 821 - CESTAT AHMEDABAD holding that the reimbursements of salaries and wages received for the deputation of employees will not be taxable - appeal allowed - decided in favor of appellant.

Summary

Issues involved: Service tax liability on reimbursements of salaries and wages paid to employees deputed to sister concern.

Analysis:
The appeal challenged an Order-in-Original confirming service tax liability, interest, and penalties imposed by the adjudicating authority. The issue centered around the service tax liability on an amount received by the appellant from their sister concern as reimbursements of salaries and wages paid to employees deputed to do work for the sister concern. The adjudicating authority categorized these services as 'Support Services of Business or Commerce'.

The Tribunal noted that the employees were deputed to the sister concern, with the appellant bank paying their remuneration, which was then reimbursed at actuals by the sister concern. Importantly, there was no evidence to suggest that the appellant received any additional amount for deputing the employees. The Tribunal referred to a similar case involving Arvind Mills Ltd, where it was held that reimbursements of salaries and wages for employee deputation were not taxable. This decision was upheld by the Hon'ble High Court of Gujarat. Additionally, a similar issue was addressed in the case of Larsen & Toubro Ltd, where the bench ruled in favor of the appellant based on previous judgments.

Given the precedents and decisions already established by the Tribunal, the bench found no reason to deviate from the view taken in previous cases. Consequently, the impugned order confirming service tax liability was deemed unsustainable and set aside, leading to the allowance of the appeal. The operative part of the decision was pronounced in court, setting aside the impugned order and allowing the appeal.