Employment service exclusion applied to dual employment salary payments, keeping the amounts outside service tax.

Salary and allowances paid under a dual employment arrangement were held not liable to service tax because the employee was found to be serving the Indian company in the course of employment, bringing the arrangement within the exclusion for services provided by an employee to an employer. The fact that social security benefits remained with the foreign company did not change that character, and the earlier pre-2012 service tax entries were held not to control the later statutory definition. The Reserve Bank circular relied upon was treated as irrelevant to taxability.

---

---

Issues: Whether salary and allowances paid by the Indian company to an employee deputed under a dual employment arrangement were liable to service tax, or were excluded from the definition of service as employment service.

Analysis: The Authority held that the governing provision was the exclusion in the definition of service for a service provided by an employee to an employer in the course of or in relation to employment. The agreement showed that the individual served the Indian company as its employee during the relevant period, while social security benefits continued to be borne by the foreign company without reimbursement. The earlier pre-2012 service tax entries could not control the construction of the later statutory definition, and the Reserve Bank circular relied upon was held irrelevant to the taxability question.

Conclusion: The salary and allowances paid under the dual employment arrangement were not exigible to service tax.

---