2024 (7) TMI 1149 - HC - GST

Levy of service tax on the amount of salaries and perquisites relating to expats under Manpower Recruitment or Supply Agency Service - HELD THAT - Since the petitioners have already represented and have taken time as such before the Revenue on 20.11.2023 that they are in the process of collating the documents to prepare a comprehensive response, the necessary response be filed by 15.01.2024. The respondents shall then take a decision on the same. In case any adverse order is passed against the petitioners during the pendency of the writ petition, the respondents shall not take any coercive steps to recover the amount. Adjourned to 13.02.2024.

Summary

Issues:
1. Interpretation of employment agreement for expatriates and tax implications.
2. Dispute regarding payment of service tax on expatriate salaries and perquisites.
3. Voluntary deposit of IGST on amount reimbursed to overseas entity for GST registration.
4. Show cause notice under Section 73(1) of the CGST Act for payment of IGST.
5. Jurisdictional challenge and reference to similar cases in Delhi High Court.

Analysis:
1. The judgment involves the interpretation of an employment agreement between the petitioner and expatriates, highlighting the tax implications. The petitioner's parent company, based in Germany, entered into an agreement for employing personnel with specific skills and expertise. The remuneration, including salary, bonus, benefits, and reimbursement, was to be paid outside India within legal limits. The parent company was to act as a paying office, with the petitioner bearing all personnel costs. Reference to specific agreements shows the structure of payments and deductions for expatriates.

2. A previous dispute regarding service tax on expatriate salaries and perquisites was mentioned, where the Tribunal ruled in favor of the petitioner for a specific period. However, a recent investigation was initiated following a judgment by the Apex Court, leading to a notice for payment of IGST along with interest. The petitioner had voluntarily deposited sums towards IGST for GST registration, but a show cause notice was issued under the CGST Act, challenging the taxability of amounts paid in Indian rupees.

3. The counsel highlighted the voluntary deposits made towards IGST for overseas reimbursements, specifying amounts for different GST registration numbers. Despite providing details asserting non-taxability, a show cause notice was issued under Section 73(1) of the CGST Act. The counsel raised concerns about the jurisdictional aspect and referenced similar cases in the Delhi High Court and the interim order passed by the High Court in related matters.

4. The judgment concludes with a direction for the petitioner to file a comprehensive response by a specified date, considering the ongoing representations made to the Revenue. It further instructs that no coercive steps be taken for recovery if an adverse order is passed during the pendency of the writ petition. The order is to be placed in the file of the connected case, and the matter is adjourned to a future date for further proceedings.