2018 (7) TMI 1375 - AT - Service Tax

Manpower Recruitment and Supply Agency Services - Reverse Charge Mechanism - Department was of the view that such employees were being paid by the foreign principal and not the Appellant, and hence, MCI has supplied manpower from abroad to the Appellant - Held that - The Tribunal has decided the identical issue for the earlier period in the case of M/S MITSUI PRIME ADVANCED COMPOSITES INDIA PVT. LTD. VERSUS CCE, JAIPUR I 2018 (4) TMI 1464 - CESTAT NEW DELHI , where it was 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 - demand set aside - appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Interpretation of Service Tax liability under Reverse Charge basis for Manpower Recruitment and Supply Agency Services.
2. Determination of employer-employee relationship in the context of deputation of employees from a foreign principal.
3. Consideration of statutory obligations fulfilled by the appellant in the context of Service Tax liability.

Analysis:
1. The appeal addressed the issue of Service Tax liability under Reverse Charge basis for Manpower Recruitment and Supply Agency Services. The Department contended that employees deputed by a foreign principal were being paid by the principal, leading to a demand for Service Tax. The Tribunal examined the agreements and employee contracts, finding an employer-employee relationship between the appellant and the deputees. The Tribunal cited precedents where it was established that the appellant controlled and paid the deputees, fulfilling statutory obligations as an employer. The Tribunal concluded that the activity did not fall under the category of Manpower Recruitment and Supply Agency Services, setting aside the impugned order in favor of the appellant.

2. The issue of determining the employer-employee relationship arose concerning the deputation of employees from a foreign principal. The Tribunal scrutinized the agreements and employee contracts, noting that the appellant paid salaries, Provident Fund contributions, and other benefits to the deputees. By establishing control and supervision over the deputees, the Tribunal concluded that an employer-employee relationship existed, as evidenced by the fulfillment of statutory obligations by the appellant. Citing relevant case law, the Tribunal emphasized the absence of a profit or financial benefit in such deputations, ultimately setting aside the impugned order in favor of the appellant.

3. The consideration of statutory obligations fulfilled by the appellant was crucial in determining Service Tax liability. The Tribunal observed that the appellant discharged Provident Fund contributions, TDS for income tax, and other obligations, indicating an employer-employee relationship. By analyzing the agreements and control exerted by the appellant over the deputees, the Tribunal found no merit in the impugned order. Following precedent and established legal principles, the Tribunal set aside the order and allowed the appeal, recognizing the appellant's fulfillment of statutory obligations as a key factor in the decision-making process.