Secondment payments and service tax: salary-linked reimbursements to expatriate employees were prima facie outside manpower recruitment service.

Amounts paid for expatriate employees seconded to India were treated by the adjudicating authority as consideration for manpower recruitment or supply agency services under reverse charge. The Tribunal, following an earlier Tribunal ruling affirmed by the High Court, noted that salary-linked secondment payments do not constitute manpower recruitment or supply agency services. It therefore held that the assessee had made out a strong prima facie case against service tax on this head, and the demand was not sustainable at this stage.

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Issues: Whether amounts paid to foreign entities in respect of employees seconded to India were taxable as manpower recruitment or supply agency services under service tax law.

Analysis: The adjudicating authority treated salary and reimbursement payments made for expatriate personnel deputed in India as consideration for manpower recruitment or supply agency services under the reverse charge mechanism. The Tribunal noted that an identical controversy had already been decided in favour of the assessee by the Tribunal and affirmed by the High Court, where such salary-linked payments on secondment were held not to constitute manpower recruitment or supply agency services. Following that view, the Tribunal held that the assessee had made out a strong prima facie case against the service tax demand under this head.

Conclusion: The amount paid towards seconded employees was held, prima facie, not taxable as manpower recruitment or supply agency services, and the assessee succeeded on this issue.

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