Reimbursement of deputed employee costs is not Business Auxiliary Services where no independent marketing or promotion service is provided.

Recovery of actual employee costs for deputing staff to group companies was not taxable as Business Auxiliary Services where the arrangement showed only lending of employees, not an independent service of promoting or marketing goods. The employees remained under the control of the recipient group companies, and the recoveries were on a pure reimbursement basis without any mark-up. On that reasoning, the activity fell outside the charging scope of section 65(19) of the Finance Act, 1994, and the service tax demand was unsustainable.

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Issues: Whether the appellant's recovery of actual employee costs from group companies for deputing staff for marketing activities constituted taxable service under Business Auxiliary Services.

Analysis: The agreement and surrounding facts showed that the appellant was only lending or deputing employees to group companies, while the deputed employees remained governed by the terms of the respective group companies for whose work they were sent. The arrangement did not show any service by the appellant of promoting or marketing the goods of the group companies for consideration. The recoveries were on an actual cost basis without any mark-up and were in substance reimbursement of shared employment costs. On that footing, the activity did not fall within the charging scope of Business Auxiliary Services under Section 65(19) of the Finance Act, 1994.

Conclusion: The demand of service tax was unsustainable and the issue was decided in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded with consequential relief.

Ratio Decidendi: Mere reimbursement of shared employee costs for deputation within a group, without any mark-up or independent service of promotion or marketing, does not constitute taxable Business Auxiliary Services.

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