2018 (12) TMI 81 - AT - Service Tax

Manpower Supply and Recruitment Agency Service - expenses incurred towards secondment of employees from group companies - period April 2005 to September 2011 - Held that - The tax liability with regard to the payments made to such employees itself has been settled in favour of the appellant particularly in the case of Computer Sciences Corporation India Private Limited 2014 (11) TMI 125 - ALLAHABAD HIGH COURT , where it was held that There was no basis whatsoever to hold that in such a transaction, a taxable service involving the recruitment or supply of manpower was provided by a manpower recruitment or supply agency. Unless the critical requirements of clause (k) of Section 65(105) are fulfilled, the element of taxability would not arise - demand not sustainable. Demand of interest - Held that - As service tax has been paid at that time, in that circumstances, no interest has been payable by the appellant - demand of interest not sustainable. Business Support Services - Held that - The group entity has merely arranged certain services for Colt group as a whole, the cost of which is being shared between the group companies. Such sharing of expenses without provision of any services cannot be said to result in provision of a taxable service under Business Support Services - no service tax is payable by the appellant. Appeal allowed - decided in favor of appellant.

Summary

Issues:
- Demand of service tax on expenses incurred towards secondment of employees from group companies to the appellant under Manpower Supply and Recruitment Agency Service for the period April 2005 to September 2011.
- Incorrect calculation of demand, including expenses incurred in India, reimbursements, import of services, non-payment of service tax on reimbursements made in foreign exchange, and non-payment of interest for delay in payment of service tax.
- Liability of interest in respect of services received from associated enterprises.
- Whether the demand of service tax on certain expenses is sustainable.
- Whether interest is payable on the delayed payment of service tax.
- Whether certain expenses qualify as Business Support Services and are liable for service tax.

Analysis:
The appellant appealed against the demand of service tax on expenses related to secondment of employees from group companies. The appellant argued that tax liability concerning payments to employees had been settled in their favor by previous decisions. The appellant emphasized decisions by the Hon'ble High Court and Tribunal to support their stance, stating that no tax liability existed on such payments. Additionally, the appellant contended that the demand was miscalculated, citing legal precedents to support their position on various aspects, including the period prior to 18.04.2006 and expenses incurred in India. The appellant also challenged the liability of interest, asserting that they had paid service tax in accordance with the relevant period and no interest was due.

The Revenue, represented by the Ld. AR, supported the findings of the impugned order. After hearing both parties and considering their submissions, the Tribunal analyzed the case. The Tribunal observed that the tax liability concerning payments to employees had been settled in favor of the appellant based on legal precedents. Citing specific cases, the Tribunal concluded that the demand for service tax on this account was not sustainable. Regarding the interest liability, the Tribunal noted that the appellant had paid service tax when the remuneration for services was disbursed, thus absolving them from paying interest. The Tribunal also addressed the demand confirmed under Business Support Services, ruling that certain expenses shared between group companies without the provision of services did not qualify as taxable under Business Support Services, hence no service tax was payable by the appellant.

In light of the above analysis, the impugned order was set aside, and the appeal was allowed with consequential relief, if any. The Tribunal's decision provided detailed reasoning based on legal interpretations and precedents, ultimately favoring the appellant's arguments and granting relief on various aspects of the case.