Manpower recruitment service: secondment can be taxable despite salary reimbursement; extended limitation needs proof of suppression intent.

The note addresses two issues: first, whether supplying trained personnel by one joint-venture partner to the other constitutes taxable manpower recruitment or supply agency service; applying the secondment/deputation test the author concludes such supply can attract tax even where salaries are reimbursed without separate markup, and no contractual mandate to supply personnel was found. Second, whether the demand is time-barred; the author concludes the extended limitation cannot be invoked absent proof of suppression with intent, so part of the demand is time-barred and the matter is remanded for verification for the normal period without penalties.

---

---

Issues: (i) Whether supply of trained personnel by NLC to NTPL falls within the taxable service of manpower recruitment or supply agency service under Section 65(68) read with Section 65(105)(k) of the Finance Act, 1994; (ii) Whether the demand is barred by limitation.

Issue (i): Whether the act of supplying trained personnel by NLC to NTPL constitutes taxable manpower recruitment or supply agency service.

Analysis: The Tribunal applied the legal test whether the arrangement amounted to supply/secondment of manpower such that one party provided manpower services to another and whether reimbursement of salary without markup precludes levy. The Tribunal relied on authoritative precedent holding that secondment/deputation can attract tax under the manpower recruitment or supply agency definition even where salary is reimbursed without separate markup and found no contractual mandate in the joint venture agreement requiring NLC to supply personnel.

Conclusion: Issue (i) is answered in favour of the Revenue and against the assessee; the supply/secondment of personnel can constitute taxable manpower recruitment or supply agency service.

Issue (ii): Whether the show cause notice and demand are barred by limitation, including invocation of the extended period under proviso to Section 73(1) of the Finance Act, 1994.

Analysis: The Tribunal examined whether there was suppression with intent to evade or other grounds to invoke the extended period. It found that records and prior disclosures to the Department were available, that the matter involved substantial questions of law and interpretation, and that no positive act of suppression was established to justify extended limitation.

Conclusion: Issue (ii) is answered in favour of the assessee; the invocation of the extended period of limitation cannot be sustained and part of the demand is time-barred.

Final Conclusion: The merits on taxability are upheld for the Revenue while the extended period invocation is rejected for the assessee; accordingly the appeal is allowed in part and the matter is remanded to the Adjudicating Authority for verification of receipts for the normal period (01.04.2011 to 31.03.2012) with direction that penalties shall not be imposed for the remanded period.

Ratio Decidendi: Secondment or deputation of employees may constitute manpower recruitment or supply agency service under Section 65(68) read with Section 65(105)(k) of the Finance Act, 1994 even if salary is reimbursed without separate markup; invocation of the extended period requires proof of suppression with intent to evade or clear grounds justifying extended limitation.

---