2020 (9) TMI 7 - AT - Service Tax

Tribunal rules deputed employees as own, not supply service, favoring appellant.

The Tribunal ruled in favor of the appellant, setting aside the Commissioner's decision to tax the salary paid to deputed employees under 'Manpower ... Classification of services - Manpower Recruitment or Supply Agency Service or not - reverse charge mechanism - salary paid to employees deputed to the appellant by their parent company for assisting them in their business operations of software development and information technology and other related support service - HELD THAT:- In the ruling of Tribunal in M/S VOLKSWAGEN INDIA PVT LTD VERSUS COMMISSIONER OF CENTRAL EXCISE [2013 (11) TMI 298 - CESTAT MUMBAI] was followed by the Delhi Bench in M/S NISSIN BRAKE INDIA PVT. LTD. VERSUS CCE, JAIPUR – I [2018 (5) TMI 1223 - CESTAT NEW DELHI] upheld in C.C.E. AND S.T. JAIPUR -I VERSUS NISSIN BRAKE INDIA PVT. LTD. [2019 (2) TMI 1630 - SC ORDER] wherein under similar facts and circumstances, the issue was decided in favour of the appellant-assessee. Revenue preferred an appeal before the Hon’ble Supreme Court against the order of Tribunal in Nissin Brake India Pvt. Ltd. and by order dated 22/02/2019, Hon’ble Supreme court held that it finds no merit in the appeal and was accordingly pleased to dismiss the appeal. Thus, the principle of law laid down in the case of M/s. Volkswagen India (Pvt.) Ltd. and followed in Nissin Brake India Pvt. Ltd. have crystallized and attained finality. Appeal allowed - decided in favor of appellant. Issues involved:Whether salary paid to employees deputed by parent company for assisting in business operations is liable to service tax under 'Manpower Recruitment or Supply Agency Service' category.Detailed Analysis:Issue 1: Taxability of Salary Paid to Deputed EmployeesThe main issue in this case revolved around the taxability of the salary paid to employees deputed by the parent company to assist the appellant in its business operations. The agreement between the parties outlined the terms and conditions of secondment, where the employees were to assist the appellant under the appellant's supervision and control. The appellant reimbursed the parent company for all expenses related to the deputed employees, including salary and other benefits. The Ld. Commissioner held that this arrangement fell under the category of 'manpower recruitment or supply agency service' as per the Finance Act, 1994. The Ld. Commissioner emphasized that the supplier of manpower need not be a specialized agency, and any commercial organization/person can provide such services. Additionally, the Ld. Commissioner invoked the extended period under Section 73(1) of the Finance Act, 1994, and imposed interest and penalties on the appellant.Issue 2: Judicial Precedents and ApplicabilityThe appellant relied on the judgment in the case of M/s. Volkswagen India (Pvt.) Ltd., where it was held that the deputed employees were considered as the appellant's own employees, and there was no supply of manpower service by the parent company. This ruling was upheld by the Supreme Court. The Tribunal also referred to a similar case involving Nissin Brake India Pvt. Ltd., where the issue was decided in favor of the appellant-assessee, and the Supreme Court dismissed the revenue's appeal. Based on these precedents, the Tribunal concluded that the principle established in the Volkswagen case had attained finality. Consequently, the Tribunal allowed the appeal and set aside the impugned order, granting the appellant consequential benefits in accordance with the law.In conclusion, the Tribunal's decision was based on the interpretation of the secondment agreement, the taxability of the services provided by the parent company, and the applicability of judicial precedents in similar cases. The judgment clarified the distinction between employee-employer relationships and the provision of manpower recruitment services, ultimately ruling in favor of the appellant based on established legal principles and precedents.