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TMI Blog2020 (12) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... under its ambit, two types of activities i.e. recruitment of manpower and supply of manpower and further the service becomes the taxable service only if provided by a manpower recruitment or supply agency but in the present case, we are concerned only with the supply of manpower. Further, it is found that after the post July 2012, the definition of service specifically incorporated seeks to exclude certain transactions from the ambit of service and provision of service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. Also, the legal position post negative list regime does not make any departure from the settled position of law as existed before 2012 with respect to the service tax implications on deputation of employees. In fact, the above exclusion in the definition of service amplifies the position of law to keep employees providing service to the employer in the course of their employment out of the purview of service tax. We have also examined the agreements entered into by the appellant with a group company which are specifically for provision of certain specialized services and are not related to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax and interest due from the appellant, if any. Appeal allowed by way of remand. X X X X Extracts X X X X X X X X Extracts X X X X ..... eement to understand the activity are as follows: a) When required Appellants requests the group companies for managerial and technical personnel to assist in its business and accordingly the employees are selected by the group company and they would be transferred to Appellants. b) The employees shall act in accordance with the instructions and directions of Appellants. The employees would devote their entire time and work to the employer seconded to. c) The seconded employees would continue to be on the payroll of the group company (foreign entity) for the purpose of continuation of social security/retirement benefits, but for all practical purposes, Appellants shall be the employer. During the term of transfer or secondment the personnel shall be the employee of Appellants. Appellants issue an employment letter to the seconded personnel stipulating all the terms of the employment. d) The employees so seconded would receive their salary, bonus, social benefits, out of pocket expenses and other expenses from the group company. e) The group company shall raise a debit note on Appellants to recover the expenses of salary, bonus etc. and the Appellants shall reimburse the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 65(105) (k) of the Finance Act, 1994; ii. The group companies and their various branches/subsidiaries abroad, as the case may be, would be the service provider and the Appellant, who receives the skilled manpower, on secondment basis, would be the service recipient. iii. There are no exclusion clauses in the definition of manpower recruitment or supply agency, under Section 65(68) of the Finance Act, 1994, that the service provider should possess the status of certain specified person or organization, for the purpose of providing the taxable service of manpower, recruitment or supply agency as defined under Section 65(105)(k) of the Finance Act, 1994. iv. The idea behind secondment arrangement is that the secondee will remain employed by the original employer during the secondment, and will, following the termination of the secondment return to the seconder as a consequence of which the secondee does not become integrated into the host's organization. v. The obligation of the service provider would cease once employees were recruited and seconded. Hence the liability of service tax under Section 65 (105) (k) would be triggered at that event. vi. There is no exclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and penalty. 5. The assesses filed detailed replies on 02.07.2014 and 31.12.2015, mainly harping that Service tax cannot be demanded as the services received from the foreign affiliates do not fall under Manpower Recruitment or Supply Agency Services for the period prior to Negative List. Further, for the period post Negative list, the definition of the term 'Service' as per Finance Act, specifically excludes the service provided by the employee to the employer. Therefore, the amount paid to the foreign entity as reimbursement of Salary of the seconded employees cannot be construed as consideration for supply of manpower services. 6. After following the due process, the learned Commissioner, Bangalore had vide Order-in-Original No. 54-55/2016-17 dated 27.02.2017/16.06.2017 dropped the proposals in the Show Cause Notice for the period April 2012 to March 2013 and April 2013 to September 2014, thereby setting aside demand of service tax of ₹ 4,36,75,590/- and ₹ 7,55,48,448/- respectively (Total ₹ 11,92,24,038/-). 7. Based on the perusal of the Secondment Agreement, the Ld. Commissioner in the Order-in-Original No. 54-55/2016-17 dated 27.02.2017/16.06.2017 has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellants submitted that the impugned order passed in assessee's appeal is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that the Department having passed a well-reasoned order (Orderin-Original No. 54-55/2016-17 dated 27.02.2017/16.06.2017) on merits cannot change the stand for a demand on the very same activity for the previous period and therefore the demand ought to be set aside on this ground alone. Learned Counsel also took us through the various clauses of the agreement between the appellant and its group companies which are basically for provision of certain specialized services and are not related to "supply of manpower" which is evident from various clauses in the Agreements. The employees seconded to India are required to report to the officers of the appellant and such employees are accountable for their performance to the appellant. He further submitted that an employeremployee relationship comes into existence between the appellant and the employees seconded by the group companies abroad and the arrangement will not fall under the taxable service of "manpower recruitment or supply agency" ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s India Yamaha Motor Pvt. Ltd. Vs CCE, New Delhi, 2019TIOL-3675-CESTAT-DEL. 10.1 He further submitted that in the present case there is no consideration charged by the foreign companies on the appellant for providing the supply of manpower as alleged by the Department and confirmed in the impugned order. He also submitted that the consideration under Section 67 of the Finance Act, 1994 is that amount which is (a) charged by the service provider on the service recipient, (b) for the provision of service provided to the service recipient and (c) should flow from the service recipient to the service provider but in the present case there is no consideration charged by the foreign company on the appellant for providing the supply of manpower as alleged by the Department and confirmed by the impugned order. He also submitted that even the Commissioner in Para 5.16(c) of his order records that "I find from Form-15 CB, Form-15 CA prescribed under Section 195(6) of the Income Tax Act, 1961 and the Debit Notes placed before me along with the aforesaid SCN that there exists remittance by the assessee to M/s TNTC, towards the reimbursement of expenses pertaining to expat salary" and hence t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervice tax, the question of payment of interest does not arise. 11. On the other hand, learned AR reiterated the findings of the impugned order in assessee's appeals and in the Department's appeal, learned AR submitted that the activity of providing skilled manpower on secondment basis, which works under the supervision and control of the appellant for a fixed period of time on temporary basis, to the appellant, falls in the domain of the manpower recruitment or supply agency service within the meaning of Section 65(68) read with Section 65(105)(k) of the Finance Act, 1994. He further submitted that the overseas group companies would be the service provider and the appellant, who receives the skilled manpower, on secondment basis, would be the service recipient and there is no exclusive clause in the definition of manpower recruitment or supply agency under Section 65(68) of the Finance Act, 1994 that the service provider should possess the status of certain specified person or organization for the purpose of providing the taxable service of manpower, recruitment or supply agency. He further submitted that the obligation of the service provider would cease once employees were rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. 12.3 Further, after examining the various definitions cited supra, we find that in order to classify any service under the manpower recruitment or supply agency service the following conditions needs to be satisfied: i. The agency must be any person ii. It must be engaged in providing a specified service iii. The specified service is recruitment or supply of manpower iv. The service can be provided 'temporarily or otherwise' v. The service may be provided directly or indirectly vi. The service may be provided in any manner vii. The service must be provided to any other person 12.4 Further, we find that the definition of " ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... based on same set of facts set aside the demand in as much as there was a distinct employee-employer relationship between the seconded employee and the assessee. We also hold that method of disbursement of salary cannot determine the nature of the transaction and this issue was considered in the case of M/s. Volkswagen India Pvt. Ltd. v. CCE, Pune-I reported in 2014 (34) S.T.R. 135 (Tri. - Mumbai) which has been upheld by the Hon'ble Apex Court in the case of Commissioner Vs Volkswagen India (Pvt.) Ltd. - 2016 (42) S.T.R. J145 (S.C.). We also find that in the case of Computer Sciences Corporation India Pvt. Ltd. v. Commissioner of Service Tax, Noida reported in 2014-TIOL-434-CESTAT DEL as affirmed by Commissioner of Central Excise v. M/s Computer Science Corporation India Pvt. Ltd. 2015 (37) S.T.R. 62 (All.) wherein the facts of the case were similar to the present case. The Hon'ble High Court of Allahabad has dealt with the same issue and has held as under: "8. In the present case, the Commissioner clearly missed the requirement that the service which is provided or to be provided, must be by a manpower recruitment or supply agency. Moreover, such a service has to be in relatio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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