9911796707
TMI Blog2024 (7) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... taxable services viz. Airport Services, Business Auxiliary Services, Consulting Engineering Service, Manpower Recruitment Agency service etc. On the basis of intelligence, investigation was initiated which revealed that the Appellant though recipient of taxable services provided from outside India had not discharged appropriate service Tax e under Rule 2(1)(d)(iv) of Service Tax Rules, 1994. It further revealed that the appellant had entered into a service agreement with M/s. Unique (Flughafen Zurich AG), Switzerland (M/s. Unique, for short) for providing personnel to work with the appellant and the salaries are agreed to be paid in convertible foreign currency for which the overseas company M/s. Unique raised debit notes on the appellant with details of remuneration disbursed on behalf of the appellant. It is alleged that the activity attracts service tax under the category of "Manpower Recruitment or Supply Agency Services" under Section 65(68) read with Section 65(105)(k) prior to 01.07.2012 and under the provisions of Section 65(B)(44) read with Section 65(B)(51) of the Finance Act, 1994, but did not discharge service tax on the same. Also, it reveled that the Appellant had rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the appellant Company was promoted by the following indigenous and overseas companies viz. (a) M/s. Siemens Project Ventures, Germany ('SPV'), (b) M/s. Unique Zurich Airport Limited, Switzerland (UZA), (c) Larsen & Toubro Limited (L&T), (d) Airport Authority of India (AAI) and (e) Karnataka State Industrial Investment Development Corporation (KSIIDC). He has submitted that the entities at (a), (b), (c) are private promoters and (d) & EUR are state promoters; besides (c), (d) and (e) resident promoters and (a) & (b) are non-resident promoters. 3.1 Assailing confirmation of demand on 'Manpower Recruitment or Supply Agency services', he has submitted that by respective agreements with overseas company M/s. Unique, the appellant has recruited some of the employees of M/s. Unique on fulltime basis as assigned and exclusively for the service of the appellant during the assignment period. He has submitted that the terms and conditions of the Secondment Agreement in issue is quite different from the judgment delivered by the Hon'ble Supreme Court in CC, CE&ST, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd. [2022(61) GSTL 129 (SC)]. Distinguishing the facts of the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has submitted that the demand of Rs. 41,26,163/- confirmed by the ld. adjudicating authority under 'Management Consultancy Services' under Section 66A of the Finance Act, 1994 is unsustainable. Further he has submitted that the learned Commissioner analysing the scope of the definition of 'Management Consultancy Service' held that the appellant had paid the cost/expenses with regards to services viz. design, engineering and development of the project, air traffic study etc. 01.01.2005 to 31.03.2006; hence squarely fall within the Section 65(65) read with Section 65(105)(r) of the Finance Act, 1994. Further, he has submitted that the appellant accepting their liability under the scope of 'Management Consultancy Services', excluding the development cost, paid service tax of Rs. 6,15,221/- for the period 2005-06. Out of this total amount of Rs. 30,26,246/-(excluding development cost) Rs. 6,15,221/- has been paid by them under the said service; Rs. 99,144/- relates to legal consultancy received prior to 18.4.2006 and Rs. 1,48,285/- for the period after 18.4.2006. It is his contention that legal service became taxable only from 01.9.2009, hence, not sustai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bidders were not connected with airport services; hence confirmed the demand of Rs. 26,68,873/- against the category of airport services. The said observation of the Ld. Commissioner is erroneous as no service was rendered by the unsuccessful bidders and received by the Appellant. 3.7. He has also submitted that the credit of Rs. 6,63,716/- availed on various services which do not fall under the scope of definition of input service under Rule 2(l) of the CENVAT Credit Rules, 2004; therefore, rightly confirmed by the learned Commissioner. 3.8. Learned advocate, further assailing the confirmation of demand on Airport Services' relating to tender fee collected and retained, has submitted that the tender fee is collected from the contractors who seek to bid/tender for specific work/projects that are awarded by the appellant. The purpose for collection of tender fees are: (a) to ensure genuineness of contractors and (ii) to meet tender expenses. Therefore, these collections are not towards provision of any service but collected qua 'invitation for invitation for offer' and not the offer itself. Therefore, there is no service tax liability on these collections. 3.9. Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of the Hon'ble Supreme Court in Northern Operating Systems Pvt. Ltd. (supra), the invocation of larger period of limitation cannot be sustained. 4.1. The Ld. Authorized Representative appearing for the Revenue has submitted that the Ld. Commissioner also confirmed the demand on 'Management Consultancy Services' and 'Airport Services' for the period from April 2004 to March 2009. 4.2. Supporting the finding of the Ld. Commissioner, he has submitted that during the period in question, the appellant had received services in relation to design, engineering and development of projects, air traffic studies, design studies, etc., which squarely fall within the scope of the definition of 'Management Consultancy Service' and also the definition of the taxable service as prescribed under Section 65(105)(r) of the Finance Act, 1994. Therefore, it is contended that the services with regard to development of airport, being provided as per the shareholder's agreement and the appellant having discharged the payments in foreign currency for all the expenses incurred with regard to design, engineering and development of project, the same are to be considered as "consideration" paid by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service tax under reverse charge mechanism for services received under the category of 'Management Consultancy Services", 'Manpower Supply Agency Service' during the relevant period involved in each of the appeal in the light of the judgment of Hon'ble Supreme Court in the case of CC, CE&ST, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd.; (ii) service tax is leviable under airport services (Appeal No. ST/2429/2011) on the deposit amount collected from unsuccessful bidders; (iii) cenvat credit is admissible on various input services; (iv) extended period of limitation is invokable in appeal No. ST/2429/2011; and interest and penalty are leviable on the appellant. 7. To analyse the first issue, that is, whether manpower service supplied by M/s. Unique to the appellant, is leviable to service tax under reverse charge basis, for the period in question, it is necessary to examine whether the ratio of the judgment in the case of CC, CE & ST, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd. (supra) is applicable to the facts and circumstances of the present case. It is the Revenue's argument that the judgment is squarely applicable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts it pays as salaries, to these seconded employees. The assessee pays for certain services received from the group companies. The assessee used to discharge service tax on payments for such services in terms of Section 66A of the Act. The appropriate major expense heads were 'Salaries & Allowances', 'Relocation expenses', 'Consultancy Charges', 'Communication Expenses' and 'Computer Maintenance and repairs.' 9. The terms and conditions relevant to the present case, extracted from the agreement dated 11.07.2005 to examine the rival claims, are as below:- EXPATRIATE REMUNERATION REIMBURSEMENT AGREEMENT THIS AGREEMENT is entered on July 11th, 2005 by and between Bangalore Internation Airport Ltd., a company organized and existing under the laws of India and located at Khanija Bhavan, Ground Floor, #49, Race Course Road, Bangalore 560 001 (hereinafter referred to as 'BIAL') and Unique (Flughafen Zurich AG), a corporation established under the laws of Switzerland and located CH-8058 Zurich-Flughafen (hereinafter referred to as "Unique"). WHEREAS BIAL is engaged in the business of Developing the construction and operation of the airport at Devenahalli, Bangalore. WHEREAS BIAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces to be provided by the Assignee of Unique to BIAL during the period commencing as set out in Schedule 1, BIAL agrees to reimburse Unique for the Foreign Currency Remuneration made by Unique to the Assignee subject to any requisite approval of the Government of India / Reserve Bank of India. 3.2. The Foreign Currency Remuneration paid by Unique to the Assignee shall be reimbursed by BIAL on a cost to cost basis. 3.3. Unique shall quarterly send to BIAL Debit Notes for the reimbursement of the Foreign Currency Remuneration paid by it to the Assignee and BIAL agrees to pay the notes within 30 days of receipt. 3.4. The Foreign Currency Remuneration reimbursable by BIASL to Unique under this Agreement shall be net of any withholding or other applicable taxes which shall be the sole responsibility of and borne by BIAL. 3.5. It is hereby expressly agreed that all payments / reimbursements described in this clause to be made by BIAL to Unique are subject to full compliance of all applicable legislation in India more specifically but not limited to the obtaining of necessary approvals if any required from the Reserve Bank of India / The Indian Income Tax Authorities as per applic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion solely under the control, direction and supervision of appellant and in accordance with the policy, rules, guidelines applicable to the employees of the appellant. The appellant shall have the sole right to take punitive steps against misconduct, negligence, fraud or unsatisfactory performance of work by the dispatched personnel during employment with the appellant company and also have the right to terminate the employment. The remuneration to be paid by the appellant to dispatched personnel as laid down at Schedule 2 comprising of Monthly salary in India; Monthly Salary in Switzerland; Bonus in Switzerland and any other allowance paid / cost incurred for the dispatched personnel during the employment period. Further it is agreed that in respect of monthly salary in India and monthly salary in Switzerland and bonus in Switzerland on the request of the dispatched personnel as his home country is Switzerland and for administrative convenience, appellant company to request overseas company to make such payments in Switzerland which shall be reimbursed by the appellant on actual cost basis. It is also stipulated that such arrangement in no manner be considered as employer-employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod (Article II of the secondment agreement and the "Duration" clause in the letter of understanding with the seconded employee); (viii) The letter of understanding issued to the seconded employee specifies that the tenure with the assessee is an assignment (in one place, the term used is "At its conclusion, repatriation will be in accordance with the Global Mobility Repatriation Policy"); (ix) The terms include the salary payable as well as other allowances, such as hardship allowance, vehicle allowance, servant allowance, paid leave, housing allowance, etc. The nature of salary and other perks underscore the fact that the seconded employees are of a certain skill and possess the expertise, which the assessee requires. 50. The above features show that the assessee had operational or functional control over the seconded employees; it was potentially liable for the performance of the tasks assigned to them. That it paid (through reimbursement) the amounts equivalent to the salaries of the seconded employees - because of the obligation of the overseas employer to maintain them on its payroll, has two consequences : one, that the seconded employees continued on the rolls of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ut it differently, for all appearances, the seconded employee, for the duration of her or his secondment, is under the control of the assessee, and works under its direction. Yet, the fact remains that they are on the pay rolls of their overseas employer. What is left unsaid - and perhaps crucial, is that this is a legal requirement, since they are entitled to social security benefits in the country of their origin. It is doubtful whether without the comfort of this assurance, they would agree to the secondment. Furthermore, the reality is that the secondment is a part of the global policy - of the overseas employer loaning their services, on temporary basis. On the cessation of the secondment period, they have to be repatriated in accordance with a global repatriation policy (of the overseas entity). 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 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deployment or extension of secondment. 58. One of the arguments of the assessee was that arguendo, the arrangement was "manpower supply" (under the unamended Act) and a service [(not falling within exclusion (b) to Section 65(44)] yet it was not required to pay any consideration to the overseas group company. The mere payment in the form of remittances or amounts, by whatever manner, either for the duration of the secondment, or per employee seconded, is just one method of reckoning if there is consideration. The other way of looking at the arrangement is the economic benefit derived by the assessee, which also secures specific jobs or assignments, from the overseas group companies, which result in its revenues. The quid pro quo for the secondment agreement, where the assessee has the benefit of experts for limited periods, is implicit in the overall scheme of things. 59. As regards the question of revenue neutrality is concerned, the assessee's principal contention was that assuming it is liable, on reverse charge basis, nevertheless, it would be entitled to refund; it is noticeable that the two orders relied on by it (in SRF and Coca Cola) by this Court, merely affirmed the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; hence cannot be sustained in view of the judgment of the Hon'ble Supreme Court in the case of UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. (supra) prior to 14/05/2015. 15. We find that a total amount of Rs. 41,26,163/- has been confirmed under this category 'Management Consultancy Services' (ST/2429/2011). Also, as submitted on behalf of the appellant an amount of Rs. 17,15,138/- pertained to the period prior to 18.04.2006 and covered by the judgement of the Hon'ble High Court of Bombay in the case of Indian National Shipowners Association v. Union of India [2009 (13) S.T.R. 235 (Bom.)] which has been affirmed by the Hon'ble Apex Court, and therefore, the demand is bad in law and cannot be sustained. From the remaining confirmed amount of Rs. 24,11,025/- Rs. 1,48,285/- relates to legal consultancy charges received after 18.04.2006 and Rs. 21,63,596/- relates to reimbursable expenses. The Ld. Advocate for the appellant vehemently argued that reimbursable expenses under Rule 5 of the Service Tax (Determination of Value) Rules, 2006, could not be included in the gross tax value prior to 14.05.2015 in view of the decision of the Hon'ble Ape ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prove that the said amounts relate to unsuccessful bidders and consequently, he has confirmed the demand. Therefore, to ascertain this fact, we are of the view that this issue needs to be remanded to the adjudicating authority. 18. On the issue of availing CENVAT Credit on various input services namely, photography and videography services, asset hiring, landscaping services, office rent, civil and interior work, etc., the appellant has argued that these services are held to be 'input services' and duty paid is admissible to credit by this Tribunal in the case of JSW Steel Ltd. Vs. CCE [2021(12) TMI 381-CESTAT Bangalore]. We find that all these services have been considered by the Tribunal in the aforesaid judgement and held that the same satisfy the definition of "input service" as prescribed under Rule 2(l) of the CENVAT Credit Rules, 2004, hence, duty paid on these services is admissible to credit. Following the said precedent, we are of the opinion that CENVAT credit of the duty paid on these services is admissible. 19. We also find that the issues involved in the present appeals relate to interpretation of law and no fact has been concealed or suppressed from the knowledge o ..... 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