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TMI Blog2021 (1) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, we find that 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. We also note that 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. The persons seconded to the appellant working in the capacity of employees and payment of salaries etc is made to such employees by group companies only for disbursement purposes and hence employee-employer relationship exist and such an activity cannot be termed as manpower recruitment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .01.2013 is enclosed as Annexure-A 8. Interest Deposited ₹ 2,22,48,188 Copy of the Challans dated 05.01.2013 is enclosed as Annexure-A 2. Briefly the facts of the present case are that the appellants are engaged in providing software development and IT enabled services and are registered with Service Tax Commissionerate, Bangalore for payment of service tax under the categories of 'Information Technology Software Service', 'Business Auxiliary Service', 'Business Support Service' and 'Consulting Engineer Service'. Further, on gathering intelligence and subsequent examination of balance sheet of the assessee, the Department found that the assessee has incurred sizeable expenditure in foreign currency towards import of services but no service tax amount has been paid. After investigation, Department entertained the view that the assessee has evaded the payment of service tax on 'Manpower Recruitment and Supply of Manpower Agency Service'. The case of the appellant is that they have entered into an agreement with the M/s Target Corporation, USA for secondment of employees w.e.f. 01.04.2006 and apart from the agreement, the appellants have also issued a letter of assignment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es due to the Target, USA with respect to the employees. Each statement shall include a debit note denominated in US dollars and that shall meet all of the Appellants requirements for payments as instructed by the Appellant. ix. The seconded employees will be subject to taxation in India based on applicable taxation laws. The Appellants shall ensure that all reasonable measures are taken with respect to full compliance of the India Tax obligations of the Employees. 3. Further, as per the appellant, Target, USA have raised debit notes on the appellants towards salaries paid to the employees seconded from Target, USA and the appellants have remitted the amount in foreign currency and disclosures were made in their financial statement based on relevant accounting standards and guidance notes issued by the Institute of Chartered Accountants of India. Further, as per the appellant, the payments to expats are grouped and included as 'salaries, wages and bonus' under the head 'expenditure incurred in foreign exchange' and the same is also shown as 'reimbursement of expenses' under related party transaction as they form part of the transactions within the group entities. It is further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be performed by the seconded employees in India. Adequate details were also not available on the persons seconded or about the roles they have to perform in India. It was held that it would not be proper and just to render a ruling on the nature of the employees in respect of whom processing charges are collected by the US Principal. 3.2 As per the appellant, they were not satisfied with the advance authority ruling but to avoid further litigation and mounting interest in case of any liability, the appellants on their own account, calculated the service tax liability on the salaries etc. relating to the expats for the period 20072008 to 2012-2013 and paid service tax with interest under protest as follows: PERIOD 2007-2013 2008-2012 SERVICE TAX 6,83,05,001 5,33,42,049 INTEREST 2,83,85,571 2,22,48,188 TOTAL PAYMENTS 6,66,90,572 7,55,90,237 3.3 Subsequently, after payment of service tax the appellant availed credit of service tax and claimed refund of the said amount in terms of Rule 5 of CCR, 2004. The said refund was sanctioned in toto by the Deputy Commissioner, Bangalore vide OIO No. 24-25/2020-21 dated 06.06.2020. Further, on completion of the investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant has failed to disclose the correct value of taxable services to the department in their statutory ST-3 returns. The Appellants have failed to pay the service tax on import of services under Section 66A of the Finance Act, 1994 with an intention to evade payment of taxes on the said services. Therefore, invoking proviso to Section 73(1) of the Act is legally justified and merits confirmation. Hence the present appeal. 4. We have heard the learned Counsels for both the parties and perused the material on record and the decisions relied upon by the appellant. 5. Learned Counsel for the appellants submitted that the impugned order is not sustainable in law as the same has been passed without properly appreciating the facts and the law. Learned Counsel referred to 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 agreement. He further submitted that the employees seconded to India are required to report to the officers of the appellant and such employees are accountable for their performance to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellants are not bound by the ruling of authority for advance ruling of income tax in respect of service tax. He also submitted that the computation of liability is incorrect as the appellants have made payment of service tax along with interest on their own account and subsequently took the credit and thereafter got the refund under Rule 5 of CCR and the said refund was sanctioned in toto. He also submitted that there is not suppression of facts and everything was disclosed in the financial accounts and hence extended period of limitation cannot be invoked and penalties cannot be imposed. Learned Counsel further submitted that the identical issue involved in the present case has been considered by various Benches of the Tribunal and has decided in favour of the assessee and he cited upon the following decisions: * Honeywell Technology Solutions Lab Pvt. Ltd. Vs CST, Bangalore, 2020-TIOL-1277-CESTAT-BANG. * Volkaswagen India (Pvt.) Ltd Vs CCE, Pune-I, 2014 (34) STR 135 (Tri. Mumbai) maintained in 2016 (42) STR J145 (SC). * Paramount Communication Ltd. Vs CCE, Jaipur, 2017 (47) STR 371 (Tri. Del.) * CST Vs Arvind Mills Ltd., 2014-TIOL-441-HC-AHM-ST. * CCE Vs Computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate; 7.1 Further, we note that the scope of 'Manpower Recruitment or Supply Agency' service has been explained by Circular F.No. B1/6/2005-TRU dated 27.07.2005 as follows: 22.3 In these cases, the individuals are generally contractually employed by the manpower supplier. The supplier agrees for use of the services of an individual employed by him to another person for a consideration. The terms of the individual's employment may be laid down in a formal contract or letter of appointment or on a less formal basis. What is relevant is that the staff are not contractually employed by the recipient but come under his direction." 7.2 Further, for the period post July 2012, the nomenclature bases classification of service tax was done away with and 'service' was specifically defined under Section 65B (44) of the Finance Act, 1994. Clause 44 of Section 65B read as: (44) "service" mean ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 'supply of manpower' which is evident from various clauses in the Agreements and we also find that group companies are not in the business of supplying manpower. Further, we find that the persons seconded to the appellant working in the capacity of employees and payment of salaries etc is made to such employees by group companies only for disbursement purposes and hence employee-employer relationship exist and such an activity cannot be termed as "manpower recruitment or supply agency" and the whole arrangement between the appellant and its group companies does not fall under the taxable service of manpower recruitment or supply agency service as defined under the Finance Act, 1994. We also find that there is no service provider-recipient relationship in the present case, as required by Section 65(105)(k). This issue is no more res integra and has been settled by various decisions of the Tribunals and the High Courts and upheld by the Hon'ble Apex Court. We may refer to few of the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y remuneration and perquisites is only reimbursed by group of companies, there remains no element of profit or finance benefit. The arrangement is that of the continuous control and the direction of the company to whom the holding company has deputed the employee, such an arrangement is out of the ambit to be called manpower supply service. This Tribunal also in an identical case decided by Final Order No. 70436/2019 dated11.10.2019 by relying upon the case of Volkswagen India Pvt. Ltd. Vs. CCE, Pune-I -2014 (34) STR 135(Tri.-Mumbai) and the above discussed case law has held that the expatriates working under the assessee are the employees of the assessee as there is an employeremployee relationship. As such, there is no supply of manpower service which is rendered to the appellant by the foreign/holding company. Further, in the case of M/s India Yamaha Motor (supra) the Division Bench of this Tribunal by relying upon the decision of Computer Science Corporation India Pvt. Ltd and CST Vs Arvind Mills Ltd came to the conclusion that in the case of seconded employees, service tax is not leviable under the category of manpower recruitment or supply of manpower service. Further, the Di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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