Secondment as manpower supply service can attract service tax where host control and reimbursement arrangements exist.

Seconded employees placed under the host entity's operational control for its Indian business, while remaining on the overseas parent's payroll and with salary costs reimbursed, may constitute manpower recruitment or supply service for service tax purposes under reverse charge. On the facts described, the arrangement was treated as a taxable manpower supply rather than a mere reimbursement of employment costs. The demand was confined to the normal period because no mala fide intention was found, so the extended period was not invoked. Penalties were also deleted, leaving the service tax demand sustained only for the normal period.

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Issues: (i) Whether the seconded employees received from the overseas parent company amounted to manpower recruitment or supply service, making the appellant liable to service tax under reverse charge mechanism; (ii) whether the demand could be sustained for the extended period and whether penalties were leviable.

Issue (i): Whether the seconded employees received from the overseas parent company amounted to manpower recruitment or supply service, making the appellant liable to service tax under reverse charge mechanism.

Analysis: The agreement and secondment letters showed that the overseas entity placed skilled employees at the appellant's disposal for its Indian operations, the appellant had operational control over their work, the employees worked for a fixed tenure and were thereafter repatriated, and the salary paid by the foreign entity was reimbursed by the appellant. Applying the principles governing manpower supply and secondment, the arrangement was not treated as a mere reimbursement of employment costs but as a taxable supply of manpower by the overseas entity.

Conclusion: The appellant was liable to service tax under the category of manpower recruitment or supply agency service, against the appellant.

Issue (ii): Whether the demand could be sustained for the extended period and whether penalties were leviable.

Analysis: The demand was confined to the normal period because no mala fide intention was found, and the circumstances were treated as not warranting invocation of the extended period. In the same vein, the penalties were set aside.

Conclusion: The demand was upheld only for the normal period, and the penalties were deleted, in favour of the appellant on limitation and penalty.

Final Conclusion: The service tax demand was sustained only to the extent of the normal period, while the penalty components were set aside, resulting in a partial allowance of the appeal.

Ratio Decidendi: Where seconded employees of an overseas group company remain on the foreign payroll but are placed under the host entity's operational control for its business purposes and the salary cost is reimbursed, the arrangement may constitute manpower recruitment or supply service for service tax purposes.

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