2020 (3) TMI 746 - AT - Service Tax

Non-payment of service tax - Manpower Recruitment and Supply Agency Service - HELD THAT - From the facts brought out on record as well as after perusal of the Master Secondment Agreement, it is seen that M/s. NSK Ltd., Japan deputed staff to the appellants generally for a period of two or three years. The said staff were under the payroll of the relevant foreign company and the appellant is responsible for payment of salary, bonus, etc., to the employees. After the work period, they would return to the parent company. The salary package for the above deputed staff is in the designated foreign currency; part of the salary was disbursed to the staff in India and the balance was disbursed to their account in the home country. It is established from records that there is no temporary supply of manpower being provided by M/s. NSK Ltd., Japan/Home Companies while deputing the employees to the appellant. The said activity does not fall within the definition of Manpower Recruitment and Supply Agency Service - the demand under Manpower Recruitment and Supply Agency Service cannot sustain. Demand of service tax - Computer Network Service (on-line information and database access and/or retrieval service) - HELD THAT - It is seen from the invoice that the appellant has paid the amount to M/s. NSK Ltd., Japan. In fact, the services have been provided by M/s. NSK Network and Systems Co. Ltd., Japan to M/s. NSK Ltd., Japan. M/s. NSK Ltd., Japan has collected the cost share that was to be paid by the appellant and then paid it to the service provider viz., M/s. NSK Network and Systems Co. Ltd., Japan. The amount has been paid by appellant vide invoice raised on M/s. NSK Ltd., Japan and not to M/s. NSK Network and Systems Co. Ltd. who have provided the service of software support, liaison support, etc., for networking. Since there is no evidence of a service provider-service recipient relationship with M/s. NSK Ltd., Japan to whom appellant made payment with regard to this service, the demand made under this category cannot sustain. Consulting Engineer Service - Appellants have paid Service Tax under the said category, but however, did not include the amount paid in the nature of travel expenses, etc. - HELD THAT - There are no hesitation to conclude that the levy of Service Tax on such amount cannot sustain - decided in favour of the assessee. Time Limitation - HELD THAT - All the issues are interpretational in nature and litigations were pending before various fora. Therefore, invocation of extended period alleging suppression of facts, wilful mis-statement, etc., is without any basis. The department has not produced any positive evidence to prove their allegation of wilful mis-statement or suppression of facts - the appellant succeeds on limitation as well. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Demand under 'Manpower Recruitment and Supply Agency Service'.
2. Demand under 'Computer Network Service' (on-line information and database access and/or retrieval service).
3. Demand under 'Consulting Engineer Service'.
4. Invocation of extended period of limitation and penalties.

Detailed Analysis:

1. Demand under 'Manpower Recruitment and Supply Agency Service':
Facts and Arguments:
The appellants, a Joint Venture Company, entered into a Master Secondment Agreement with M/s. NSK Ltd., Japan and M/s. ABC Bearings Ltd., India. The agreement facilitated the deputation of personnel from the foreign companies to the appellant. The staff deputed were on the payroll of the foreign company, and the appellant was responsible for the payment of salaries, bonuses, etc. The department viewed this arrangement as liable for Service Tax under 'Manpower Recruitment and Supply Agency Service'.

Judgment:
The Tribunal found that the deputation of employees did not constitute 'Manpower Recruitment and Supply Agency Service'. The employees remained under the payroll of the foreign company, and the appellant merely reimbursed the differential expenses. The Tribunal referred to similar cases, such as M/s. Computer Sciences Corpn. India P. Ltd. and M/s. Bain & Co. India Pvt. Ltd., where it was held that such arrangements do not fall under the said service category. Consequently, the demand under 'Manpower Recruitment and Supply Agency Service' was set aside.

2. Demand under 'Computer Network Service':
Facts and Arguments:
The appellant reimbursed M/s. NSK Ltd., Japan for software and networking services provided by M/s. NSK Network and Systems Co. Ltd., Japan. The department demanded Service Tax on these reimbursements under 'Computer Network Service'.

Judgment:
The Tribunal observed that the services were provided by M/s. NSK Network and Systems Co. Ltd., Japan to M/s. NSK Ltd., Japan, and the appellant only reimbursed the cost share. There was no direct service provider-service recipient relationship between the appellant and M/s. NSK Ltd., Japan. Citing the Supreme Court decision in M/s. Intercontinental Consultants and Technocrats Pvt. Ltd., the Tribunal held that reimbursable expenses cannot be subjected to Service Tax. Therefore, the demand under 'Computer Network Service' was set aside.

3. Demand under 'Consulting Engineer Service':
Facts and Arguments:
The appellant paid Service Tax on the consideration for specialist staff deputed for rendering professional services but excluded reimbursable expenses such as travel costs. The department included these expenses in the taxable value.

Judgment:
The Tribunal noted that the reimbursable expenses were clearly identified in the Show Cause Notice and were not part of the consideration for services. Following established jurisprudence, the Tribunal held that reimbursable expenses cannot be subjected to Service Tax. Thus, the demand under 'Consulting Engineer Service' was set aside.

4. Invocation of Extended Period of Limitation and Penalties:
Facts and Arguments:
The appellant argued that the issues were interpretational and involved no wilful suppression or mis-statement, thereby contesting the invocation of the extended period of limitation and imposition of penalties.

Judgment:
The Tribunal agreed with the appellant, stating that the issues were indeed interpretational and litigations were pending in various fora. There was no evidence of wilful suppression or mis-statement by the appellant. Hence, the invocation of the extended period and penalties were unjustified.

Conclusion:
The impugned order was set aside, and the appeal was allowed with consequential reliefs. The Tribunal ruled in favor of the appellant on all counts, including the demands under 'Manpower Recruitment and Supply Agency Service', 'Computer Network Service', and 'Consulting Engineer Service', as well as on the issue of limitation and penalties.

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