2019 (8) TMI 8 - AT - Service Tax

Tribunal rules deputation of employees from Japan to India not subject to Service Tax

The Tribunal ruled in favor of the appellant, holding that Service Tax was not applicable on the deputation of employees from a group company in Japan to ... Levy of service tax - deputation/secondment of employees from a group company in Japan to the appellant in India - period from 01 April, 2014 to 31 March, 2015 - Manpower Supply Services or not - HELD THAT:- It is not in dispute that the issue involved in this appeal is similar to the issues involved in the appeal that came up for decision before the Division Bench of the Tribunal in M/S INDIA YAMAHA MOTOR PRIVATE LIMITED VERSUS COMMISSIONER OF CENTRAL EXCISE & SERVICE TAX, NEW DELHI [2019 (7) TMI 772 - CESTAT NEW DELHI] where Division Bench held that neither during the pre-negative list nor post negative list, Service Tax could not be levied on deputation of employees from a group company in Japan to the Appellant in India. Appeal allowed - decided in favor of appellant. Issues involved:Applicability of Service Tax on deputation/secondment of employees from a group company in Japan to the appellant in India.Analysis:The case involved a dispute regarding the applicability of Service Tax on deputation/secondment of employees from a group company in Japan to the appellant in India. M/s Mikuni India Private Limited had a Cost Reimbursement Agreement (CRA) with M/s Mikuni Corporation, Japan (MCI) for the deputation of personnel. The Department issued a show cause notice proposing Service Tax demand under 'Manpower Supply Services' for the period from 01 April, 2014 to 31 March, 2015. The appellant contested the demand, arguing that the deputation/secondment of employees was not covered under the definition of 'Manpower Recruitment and Supply Agency' both pre and post 1 July, 2012. The appellant relied on a recent Tribunal judgment to support their contention.The legal dispute revolved around the interpretation of relevant sections of the Finance Act, 1994. The Department contended that Service Tax was applicable under 'Manpower Supply Services' based on the deputation of Japanese employees to the appellant. However, the appellant argued that no service tax was payable as the deputation did not fall under the definition of a 'Manpower Supply Agency.' The appellant emphasized that MCI was not engaged in the business of supplying manpower and that no consideration was involved in the deputation arrangement. The appellant also highlighted that reimbursement was on a cost-to-cost basis.The Tribunal referred to a previous judgment in M/s India Yamaha Motor Private Limited, which addressed similar issues. The Tribunal observed that neither pre nor post the negative list, Service Tax could be levied on the deputation of employees from a group company in Japan to the appellant in India. The Tribunal concluded that the order passed by the Commissioner confirming the Service Tax demand was not sustainable based on the legal principles established in the referenced judgment. Consequently, the Tribunal set aside the Commissioner's order and allowed the appeal in favor of the appellant.In conclusion, the Tribunal's decision clarified the non-applicability of Service Tax on the deputation of employees from a group company in Japan to the appellant in India. The judgment provided a detailed analysis of the legal provisions and previous case law to support its decision, emphasizing the lack of a 'Manpower Supply Agency' relationship in the deputation arrangement.