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TMI Blog2023 (2) TMI 183X X X X Extracts X X X X X X X X Extracts X X X X ..... rt observed that the assessee was the service recipient for service (of manpower recruitment and supply services) by the overseas entity, in regard to the employees it seconded to the assessee, for the duration of their deputation or secondment. The arrangement in the present seven appeals is similar. Thus, the assessee would be a service recipient of the overseas group company concerned, which provided manpower supply service, which is a taxable service. The appellant, therefore, is required to discharge service tax on reverse charge mechanism. Extended period of limitation - HELD THAT:- The Supreme Court in Northern Operating System did not agree with the contention of the Department that it was correctly invoked and it was held that the Department was not justified in invoking the extended period of limitation - In view of the aforesaid decision of the Supreme Court in Northern Operating Systems, it has to be held that the demand confirmed for the extended period cannot be sustained. Levy of interest under Section 75 of the Finance Act - HELD THAT:- It is seen from provisions of Section 75, that every person who fails to credit the tax or any part thereof within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormation technology software services and receives services such as commercial training and coaching services, management or business consultant services and telecommunication services from outside India. 2. Dell India Private Limited [ Dell India ] is a company incorporated under the Companies Act, 1956 with its registered office in Bangalore. It is engaged, inter-alia, in the business of import and sale of storage units, servers, notebooks and peripherals such as projector and monitors. In addition to it, it also provides various other services such as erection, commissioning or installation services, management maintenance or repair services, information technology software services and business auxiliary service . 3. Dell International and Dell India shall hereinafter be referred to as the appellant. 4. During the course of rendering the aforementioned services during the period from 2006 to 2010, the employees of group companies of the appellant were deputed to India and salaries/expenses of such deputed employees were paid by the group companies and same was reimbursed by raising bills/invoices on the respective group companies. The total amount that wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 2010 to March 2011 5,987,946 __ 5,987,946 31.07.22 3. ST/26058/2013 24.08.2011 31.12.2012 April 18, 2006 to March 31, 2010 16,305,344 16,305,344 __ 31.07.22 4. ST/28100/2013 29.12.2011 12.08.2013 April 2010 to September 2010 328,169 __ 328,169 31.07.22 5. ST/28101/2013 05.03.2012 12.08.2013 October 2010 to March 2011 1,403,972 __ 1,403,972 31.07.22 6. ST/28231/2013 22.02.2013 21.06.2013 April 2011 to March 2012 12,293,706 __ 12,293,706 31.07.22 7. ST/21504/2014 04.12.2012 30.01.2014 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome country (of the secondees) and business considerations result in payroll retention and salary payment by the foreign entity, which is claimed as reimbursement from the host entity. The crux of the issue is the taxability of the cross charge, which is primarily based on who should be reckoned as an employer of the secondee. If the Indian company is treated as an employer, the payment would in effect be reimbursement and not chargeable to tax in the hands of the overseas entity. However, in the event the overseas entity is treated as the employer, the arrangement would be treated as service by the overseas entity and taxed. 46. From the above discussion, it is evident, that prior to July 2012, what had to be seen was whether a (a) person provided service (b) directly or indirectly, (c) in any manner for recruitment or supply of manpower (d) temporarily or otherwise. After the amendment, all activities carried out by one person for another, for a consideration, are deemed services, except certain specified excluded categories. One of the excluded category is the provision of service by an employee to the employer in relation to his employment. 49. A co-joint reading of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bligation of the overseas employer to maintain them on its payroll, has two consequences: one, that the seconded employees continued on the rolls of the overseas employer; two, since they were not performing jobs in relation to that employer s business, but that of the assessee, the latter had to ultimately bear the burden. There is nothing unusual in this arrangement, given that the seconded employees were performing the tasks relating to the assessee s activities and not in relation to the overseas employer . To put it differently, it would be unnatural to expect the overseas employer to not seek reimbursement of the employees salaries, since they were, for the duration of secondment, not performing tasks in relation to its activities or business. 54. The letter of understanding between the assessee and the seconded employee nowhere states that the latter would be treated as the former s employees after the seconded period (which is usually 12-18 months). On the contrary, they revert to their overseas employer and may in fact, be sent elsewhere on secondment. The salary package, with allowances, etc., are all expressed in foreign currency (e.g., US $ 330,000/- per annum i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the invocation of the extended period of limitation, in this court s opinion, was unjustified and unreasonable. Resultantly, the assessee is held liable to discharge its service tax liability for the normal period or periods, covered by the four SCNs issued to it. The consequential demands therefore, shall be recovered from the assessee. (emphasis supplied) 10. It would be seen from the aforesaid judgment of the Supreme Court that while the control over the performance of the employees who were seconded and the right to ask them to return was with the assessee, but it was the overseas employer who, in relation to its business, deployed them to the assessee; it was the overseas employer who paid them the salaries; the terms of employment even during the secondment were in accord with the policy of overseas company; and at the end of the period of secondment the employees returned to their original place to await deployment or extension of secondment. 11. The arrangement in the present seven appeals is similar. Thus, the assessee would be a service recipient of the overseas group company concerned, which provided manpower supply service, which is a taxable service. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iability was neither untenable, nor mala fide. This is sufficient to turn down the revenue s contention about the existence of wilful suppression of facts, or deliberate misstatement. For these reasons, the revenue was not justified in invoking the extended period of limitation to fasten liability on the assessee. 13. It is only in respect of two appeals that the issue of the extended period of limitation arises. It can be seen from the chart contained in paragraph 7 of this order that in Service Tax Appeal No. 26058 of 2013 the entire demand has been confirmed for the extended period of limitation, whereas in Service Tax Appeal No. 3195 of 2011 part of the demand has been confirmed for the normal period and part of the demand has been confirmed for the extended period. 14. In view of the aforesaid decision of the Supreme Court in Northern Operating Systems, it has to be held that the demand confirmed for the extended period cannot be sustained. 15. Ms. Disha Gurushaney, learned counsel for the appellant pointed out that the service tax liability to the extent of Rs. 38,87,52,09.00/- for the normal period was deposited by the appellant on 12.08.2022 and so the only iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the case of a service provider, whose value of taxable services provided in a financial year does not exceed sixty lakh rupees during any of the financial year covered by the notice or during the last preceding financial year, as the case may be, such rate of interest, shall be reduced by three per cent. per annum. 20. It is seen from the aforesaid provision that every person who fails to credit the tax or any part thereof within the period prescribed shall pay simple interest at such rate not below ten per cent and not exceeding thirty six per cent per annum for the period by which such crediting of the tax or any part thereof is delayed. Thus, imposition of interest is irrespective of the fact whether such nonpayment/ short payment was on account of innocence or malafide. 21. In Pratibha Processors v/s Union of India [(1996) 11 SCC 101] the Supreme Court pointed out the difference between the imposition of interest and penalty. Whereas penalty is ordinarily levied on an assessee for some contumacious conduct or for deliberate violation of the provision of a particular statute, interest is compensatory in character and is imposed on the assessee who has withheld p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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