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TMI Blog2024 (7) TMI 1600X X X X Extracts X X X X X X X X Extracts X X X X ..... e? - HELD THAT:- In the 'Expatriate Remuneration Reimbursement Agreement' dated 11.7.2005 between the appellant and M/s. Unique reveals that the terms and conditions are more or less similar to the one referred to in para 3 of the judgment of the Hon'ble Supreme Court in Northern Operating Systems Pvt. Ltd. [2022 (5) TMI 967 - SUPREME COURT]. In the present case also, the appellant was in need of personnel for facilitating the business operations in India and the overseas company, which has such personnel, who possesses the requisite qualification and skill desired to employ such persons on exclusive basis and the overseas company has duly consented to depute such personnel. The deputed personnel while under employment with the appellant was not in any way subjected to any kind of instruction or control or direction or supervision of the overseas company and they would report only to appellant's management. They function 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 service tax is applicable on the amount paid to M/s Unique for receiving Manpower service by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the overseas company cannot be sustained. ii) The demands with interest confirmed on 'Manpower Supply Services' received from the overseas company for the period after 18.4.2006, under reverse charge mechanism are sustained for the normal period of limitation only. iii) The applicability of Service Tax on the amount collected from unsuccessful bidders as pre-bid fees and retained is not liable to service tax under Airport Services. However, the adjudicating authority is directed to verify from the records whether the disputed amount relates to unsuccessful bidders only, as claimed by the Appellant. iv) The CENVAT Credit availed on various input services are admissible and hence demands on this issue are set aside. v) The penalty imposed on the Appellant cannot be sustained.
All these appeals are remanded to the adjudicating authority to recompute the demands with interest - appeal allowed by way of remand. X X X X Extracts X X X X X X X X Extracts X X X X ..... eived from the overseas company M/s. Unique and also the demanding service tax on Airport Services, inadmissible cenvat credit availed invoking extended period of limitation. Subsequent show-cause notices have been issued periodically demanding service tax on receiving 'Manpower Supply Service' from the overseas company. On adjudication, the demand Notices were confirmed by the Commissioner with interest and penalty, except in appeal ST/20568/2018, wherein the Commissioner (Appeals-II), passed the order upholding the Order-in-Original. The demands involved Appeal wise is tabulated as below:- Appeal No. Period Total demand confirmed Rs. Break-up of demand confirmed Rs. Interest & Penalty ST/2429/2011 April 2004 to March 2009 2,46,49,943 Management consultancy 41,26,163 u/s 75 u/s 76 u/s 77 u/s 78 Airport services 28,68,873 Ineligible cenvat credit 6,63,716 Manpower supply 1,69,91,194 ST/248/2012 April 2009 to March 2010 59,44,906 Ineligible cenvat credit 18,652 u/s 75 u/s 76 u/s 77 Manpower supply 59,26,254 ST/27281/2013 April 2010 to March 2011 28,95,209 Manpower supply u/s 75 u/s 76 u/s 77(2) ST/22511/2014 April 2011 to March 201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the overseas company and no part of salary was paid by the assessee. In the present case, however, the appellant recruited employees from M/s. Unique for their own purpose on a principal-to-principal basis i.e. there is no underlying economic benefit in these agreements. Further the employees are also chosen by the appellant. The preamble to the 'Expatriate Remuneration Reimbursement Agreement' dated 01.07.2005 itself unequivocally lays down that parties to the agreement are not be considered to have rendered any services by way of assigning employees. Therefore, the facts of the present case are completely different from the facts underlying in the said decision of the Hon'ble Supreme Court, which is not applicable. Therefore, the service tax as confirmed by the adjudicating authority in all these appeals for supply of manpower to the appellant cannot be sustained. Alternatively, the learned advocate for the appellant has argued that in the event the judgment of the Hon'ble Supreme Court in Northern Operative Systems Pvt. Ltd. (supra) is followed, then levy of interest and penalty be set aside and prayed that tax paid under reverse charge mechanism be declared as eligible to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elating to costs and bonus paid to UZA as reimbursement. paid by them are reimbursable expenses at actuals; hence covered by the decision of the Hon'ble Supreme Court in the case of UOI Vs. Intercontinental Consultants and Technocrats Pvt. Ltd. [2018(10) GSTL 401 (SC)] for the period prior to 14.05.2015. Therefore, the demand on this count is also not sustainable. 3.4 On the issue of admissibility of CENVAT Credit in appeal No. ST/2429/2011 and ST/248/2012 and ST/22511/2014, the learned advocate has submitted that the services received is in the nature of input services viz. Business Auxiliary Service (Sodexo passes for employees), photography and videography services, Public relation agency service etc) are square covered by the judgement of the Tribunal in the case of JSW Steel Ltd. Vs. CCE [2021 (12) TMI 381-CESTAT Bangalore]. 3.5 Further, he has submitted that the airport services rendered by the appellant during the relevant period are in the nature of services to development / running of airport. Out of the total demand of Rs. 78,87,102/-, the appellant had already discharged service tax of Rs. 50,18,229/- where the amount has been collected from the successf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d from October 2008 to March 2009, as there was no suppression of fact and the issues involved are pure questions of interpretation of law. Also, they have submitted that since the issue involved is interpretation of question of law, interest and penalty cannot be levied on the appellant. 4. The Learned Authorized Representative for the Revenue, reiterating the respective impugned orders, has submitted that the assigned employees have been deputed by M/s. Unique under 'Expatriate Remuneration Reimbursement Agreement' and it is evident from record that such employees do not cease to be employees of the overseas company during the period of assignment. These employees are rendering services on the request of the appellant and against such assignment; the appellant pays M/s. Unique which is in the nature of international assignee, costs and other remuneration to the assigned employees. Therefore, the activity is in the nature of 'Manpower Recruitment and Supply service' prior to 2012 and post-2012, 'service' as defined under Section 65B(44) of the Finance Act, 1994. He has submitted that the agreement / contract under which M/s. Unique has assigned its employees is more or less simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Service Tax of Rs. 17,15,138/- on the developmental cost received by the appellant during the period from 01.01.2005 to 31.03.2006 is correctly chargeable to Service Tax. 4.3. Further, he has submitted that out of the Service Tax demand of Rs. 30,26,246/-, the appellant has already accepted Rs. 6,15,221/-, payable under 'Management Consultancy Service' and the actual demand of Rs. 24,11,025/- is also chargeable under Management Consultancy Service for the period 2005-06 to 2008-09 to Service Tax, being the amount paid on receipt of legal services which are in the nature of due diligence report prepared by the overseas legal consultants and squarely covered vide the Order No. 1/1/2001/ST dated 27.06.2001 issued by the Ministry under Section 37B. 4.4. Further, supporting the order of the Ld. Commissioner for confirmation of demand under Airport Services, he has submitted that the tender fee / pre-award costs collected is in the nature of advance for providing the said services and to be treated as the amount collected for providing Airport Services. Therefore, it is contended that with regard to the total amount of Rs. 2,03,19,923/- received from va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 group company for all these expenses and there shall be no mark-up on such reimbursement." As a matter of fact, the assessee issues the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BIAL and that Unique shall not be held responsible for any acts or omissions of the Assignee during the Assignees assignment with BIAL; WHEREAS BIAL expressly acknowledges and agrees that the Assignee would not have any authority whatsoever to act on behalf of or bind Unique in connection with his duties towards BIAL and further that the Assignee would have no express or implied authority whatsoever to act for or represent or bind Unique; WHEREAS during the period of the Assignee's term with BIAL, it is understood and agreed between the Parties to this Agreement that in addition to any local currency remuneration paid to the Assignee directly by BIAL, the Assignee would be entitled to remuneration in foreign currency delivered to him outside of India, by Unique (hereinafter referred to as the 'Foreign Currency Remuneration'); WHEREAS the Foreign Currency Remuneration shall be made out of the items listed in Schedule of this Agreement; WHEREAS it is expressly understood and agreed upon by the parties to this Agreement that BIAL will bear the Foreign Currency Remuneration of the Assignee paid by Unique and also the amount of any taxes payable thereon to the Indian Income Tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Amount 1. Albert Brunner CEO Basic salary Social security including pension contribution Administration and Overhead and Tax Performance Bonus CHF 149'006.gross salary minus social security, pension and insurance contributions. Approx. 24.9% of gross salary and performance bonus 13% of Basic salary and Social security. Maximum 108'357 of gross salary 2. Stephan Widrig, CCO Basic salary Social security including pension contribution Administration and Overhead and Tax Performance Bonus CHF 92'400 gross salary minus social security, pension and insurance contributions. Approx. 24.9% of gross salary and performance bonus 13% of Basic salary and Social security. Maximum 67'200 of gross salary 10. In the 'Expatriate Remuneration Reimbursement Agreement' dated 11.7.2005 between the appellant and M/s. Unique reveals that the terms and conditions are more or less similar to the one referred to in para 3 of the judgment of the Hon'ble Supreme Court in Northern Operating Systems Pvt. Ltd. (supra). In the present case also, the appellant was in need of personnel for facilitating the business operations in India and the overseas company, which has such personnel, who poss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terials presented by the parties, discern the true nature of the relationship between the seconded employees and the assessee, and the nature of the service provided - in that context - by the overseas group company to the assessee. 49. A co-joint reading of the documents on record show that : (i) Attachment 1 to the service agreement ensures that the overseas group company assigns, inter alia, certain tasks to the assessee, including back office operations of a certain kind, in relation to its activities, or that of other group companies or entities; (ii) The assessee is paid a mark up of 15% of the overall expenditure it incurs, by the overseas company (clause 2, read with attachment 1 of the Service Agreement); (iii) By the Secondment Agreement, the parties agree that the overseas employee is temporarily loaned to the assessee (Article I read with the Schedule); (iv) During the period of secondment, the assessee has control over the employee, i.e. it can require the seconded employee to return, and likewise, the employee has the discretion to terminate the relationship (Article II); (v) The overseas employer (group company) pays the seconded employee, which is reimbu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee asserts the arrangement to be) or a contract for service. The general drift of cases which have been decided, are in the context of facts, where the employer usually argues that the person claiming to be the employee is an intermediary. This Court has consistently applied one test: substance over form, requiring a close look at the terms of the contract, or the agreements. 52. A vital fact which is to be considered in this case, is that the nature of the overseas group companies business appears to be to secure contracts, which can be performed by its highly trained and skilled personnel. This business is providing certain specialized services (back office, IT, bank related services, inventories, etc.). Taking advantage of the globalized economy, and having regard to locational advantages, the overseas group company enters into agreements with its affiliates or local companies, such as the assessee. The role of the assessee is to optimize the economic edge (be it manpower or other resources availability) to perform the specific tasks given it, by the overseas company. As part of this agreement, a secondment contract is entered into, whereby the overseas company's employe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts. These employees, having regard to their expertise and specialization, are seconded (a term synonymous with the commonly used term in India, deputation) to the concerned local municipal entity (in this case, the assessee) for the use of their skills. Upon the cessation of the term of secondment, they return to their overseas employer, or are deployed on some other secondment. 56. This Court, upon a review of the previous judgment in Sushilaben Indravadan (supra) held that there no one single determinative test, but that what is applicable is "a conglomerate of all applicable tests taken on the totality of the fact situation in a given case that would ultimately yield, particularly in a complex hybrid situation, whether the contract to be construed is a contract of service or a contract for service. Depending on the fact situation of each case, all the aforesaid factors would not necessarily be relevant, or, if relevant, be given the same weight." 57. Taking a cue from the above observations, while the control (over performance of the seconded employees' work) and the right to ask them to return, if their functioning is not as is desired, is with the assessee, the fact remain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omputer Sciences Corporation, are unreasoned and of no precedential value. 61. In view of the above discussion, it is held that the assessee was, for the relevant period, service recipient of the overseas group company concerned, which can be said to have provided manpower supply service, or a taxable service, for the two different periods in question (in relation to which show cause notices were issued). 13. Applying the aforesaid principle to the present case we are of the opinion that service tax is applicable on the amount paid to M/s Unique for receiving Manpower service by the Appellant. However, the demand of service tax confirmed by the Ld. Commissioner cannot be sustained for the period prior to 18.4.2006 and also for the extended period as their Lordships on the issue of invocation of extended period of limitation, decided in favour of the assessee. Consequently, the demand be restricted to normal period of limitation in appeal No. ST/2429/2011. 14. Resisting the demand confirmed in the impugned Order under the taxable category of 'Management Consultancy Services' (ST/2429/2011), for the period April 2004 to March 2009 amounting to Rs. 41,26,163/-, it is sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, an amount of Rs. 28,68,873/- has been confirmed by the ld. adjudicating authority, which is in dispute before us. The Ld. Advocate for the appellant has vehemently argued that the said Service Tax amount relates to the amount collected from unsuccessful bidders who participated in the tender process floated by the appellant in connection with various services like cargo handling, aviation fuel facility, ground handling, flight catering, etc., in the course of providing Airport Services; the said deposit amount has been collected from the persons who participated in the tender and is for the purpose of discouraging non-serious participants. The amounts so collected and retained by the appellant are in no way connected to the rendering of Airport Services as there is no relationship of service receiver and service provider between the appellant and the unsuccessful bidders. Therefore, it is argued that the confirmation of demand by the ld. adjudicating authority is incorrect. 17. We find merit in principle in the contention of the Ld. Advocate for the appellant that the Revenue could not establish that the unsuccessful bidders have rendered any services to the appellant and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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