Tribunal sets aside demands for Manpower Recruitment & Telecommunication Services.

The Tribunal allowed the appeal, setting aside the demands for both Manpower Recruitment or Supply Agency Service and Telecommunication Service. The Tribunal held that the arrangement for availing services of executives from a foreign vendor did not constitute Manpower Recruitment or Supply Agency Service. Additionally, it determined that the service providers for leased circuit services were not 'Telegraph Authorities' as defined, thus the service tax was not payable. The order was pronounced in Open Court on 11/04/2022.

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Issues Involved:
1. Manpower Recruitment or Supply Agency Service
2. Telecommunication Service

Issue-Wise Detailed Analysis:

1. Manpower Recruitment or Supply Agency Service:
The appellant, a wholly-owned subsidiary of Honeywell International Inc. (HII), was engaged in development and export of software and IT-enabled support services. An Assignment Agreement dated 1.1.2003 facilitated the provision of managerial and technical personnel from HII to the appellant. The appellant reimbursed HII for the remuneration and expenses of these seconded employees. The adjudicating authority considered this arrangement as Manpower Recruitment or Supply Agency Service and confirmed service tax for the period from April 2007 to March 2011.

The appellant argued that a similar demand was dropped in their own previous case (Honeywell Technology Solutions Lub Pvt. Ltd. Vs. Commissioner of Service Tax, Bangalore: 2020-TIOL-1277-CESTAT-BANG), where the Tribunal held that such an arrangement does not amount to Manpower Recruitment or Supply Agency Service. The Tribunal in the present case agreed, referencing the precedent set in the Honeywell case and other similar cases such as M/s. Volkswagen India (Pvt.) Ltd. and Nissin Brake India Pvt. Ltd. The Tribunal concluded that the arrangement for availing the services of executives appointed in the appellant’s company by the foreign vendor does not constitute Manpower Recruitment or Supply Agency Service. Consequently, the demand under this head was set aside.

2. Telecommunication Service:
The appellant had received leased circuit services from M/s. AT & T and Genysis, allowing access to servers located abroad. The adjudicating authority confirmed the demand under Telecommunication Service for the period from April 2007 to March 2011. The appellant contended that the service providers were not 'Telegraph Authorities' as defined in Section 65(105)(zzzx) of the Finance Act, 1994, and thus the service tax was not payable. They cited the Tribunal’s decision in TCS E-Serve Ltd. Vs. Commissioner of Service Tax, Mumbai, which held that services provided by a foreign vendor not recognized as a Telegraph Authority are not taxable under Telecommunication Service.

The Tribunal agreed, noting that the service providers were located outside India and did not qualify as Telegraph Authorities under Indian law. Therefore, the condition of the definition of Telecommunication Service was not satisfied. The Tribunal referenced CBEC’s Circular F. No.137/21/2011-ST dated 15.7.2011, which clarified that service tax is not payable when the service is provided by a foreign vendor. Consequently, the demand under Telecommunication Service was also set aside.

Conclusion:
The Tribunal set aside the impugned order and allowed the appeal, determining that the demands under both Manpower Recruitment or Supply Agency Service and Telecommunication Service were not sustainable. The order was pronounced in the Open Court on 11/04/2022.

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