2023 (8) TMI 1045 - AT - Service Tax

Levy of service tax - manpower supply services or not - taking on loan employees of other company, secondment - receiving invoices from its group company, namely M/s. BJ Services Co., Huston, Texas (Texas company) for salaries and other benefits and the amounts stated in the said invoices were paid by the appellant in foreign currency - reverse charge mechanism - extended period of limitation. HELD THAT - Both the sides agree that the ruling by Hon ble Supreme Court in the case of C.C.,C.E. S.T. BANGALORE (ADJUDICATION) ETC. VERSUS M/S NORTHERN OPERATING SYSTEMS PVT LTD. 2022 (5) TMI 967 - SUPREME COURT is squarely applicable in the facts of the present case. It was held in the case that It is held that the assessee was, for the relevant period, service recipient of the overseas group company concerned, which can be said to have provided manpower supply service, or a taxable service, for the two different periods in question (in relation to which show cause notices were issued). It is also observed that the original authority did not have advantage of the ruling by Hon ble Supreme Court while deciding the issue and passing the impugned order-in-original. The data in the appeal paper book does not throw light on the quantum of service tax that would be recoverable in case the present appeal succeeds in setting aside the demand for extended period of limitation. Thus, matter remanded to the original authority with a direction to follow and apply the ruling passed by Hon ble Supreme Court in the cited case of Northern Operating Systems Pvt. Ltd. in its letter and spirit and redetermine service tax liability of the appellant, the interest payable by the appellant and penalties to be imposed. For the said purpose, the impugned order-in-original set aside. Appeal disposed off.

Summary

Issues involved:
The issues involved in this case include the liability of the appellant to pay service tax for receiving manpower supply services from an overseas entity under reverse charge mechanism, imposition of penalties under Sections 76, 77, and 78 of the Finance Act, 1994, and the applicability of the ruling by the Hon'ble Supreme Court in a similar case.

Liability to pay service tax:
The appellant, a holder of service tax registration, received invoices from a Texas company for salaries and benefits of personnel, leading the Revenue to believe that the appellant was receiving manpower supply services. Show cause notices were issued demanding service tax for various periods, along with penalties and interest. The original authority held that the Texas company provided manpower supply services to the appellant, confirming the demands raised in all notices. The appellant contended that the arrangement was for sharing employees and that the Texas company was not providing manpower supply services. The Tribunal remanded the matter to the original authority to redetermine the service tax liability following a relevant Supreme Court ruling.

Imposition of penalties:
The original authority imposed penalties under Sections 76, 77, and 78 of the Finance Act, 1994 on the appellant in relation to the show cause notices. The appellant challenged the penalties, citing a Supreme Court ruling that similar arrangements did attract service tax but did not warrant an extended period of limitation for demand of service tax. The Tribunal set aside the penalties and remanded the matter to the original authority for redetermination based on the Supreme Court ruling.

Applicability of Supreme Court ruling:
Both parties agreed that a Supreme Court ruling in a similar case was applicable to the present case. The Tribunal observed that the original authority did not have the advantage of this ruling when making the decision. Consequently, the Tribunal remanded the matter to the original authority to reevaluate the service tax liability, interest, and penalties in light of the Supreme Court ruling. The impugned order was set aside for this purpose.