TaxTMI 
TaxTMI 
2024 (10) TMI 821
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....neration and other perks of the 'Japanese Seconded Employees'. The relevant portions of the Agreement are reproduced below: "Agreement Concerning the Treatment of Seconded Employees This Agreement is made and entered into by and between: Mitsui Prime Advanced Composites India Pvt. Ltd., New Delhi, India (ACI), on the one part xxxxxxx and Mitsui Chemicals, Inc, Tokyo, Japan (MCI) on the other part. xxxxxxxxxx. concerning the treatment of the employees of MCI seconded to ACI (hereinafter collectively referred to as "Seconded Employees" and individually referred to as "Seconded Employee"). Article 1: Form of Secondment MCI shall assign certain of their employees to ACI as officers or employees of ACI, and ACI shall accept such employees who shall continue to be employed by MCI. Article 2: Handling of Personnel Matters ACI shall in principle be responsible for the personnel management of the Seconded Employees, but the decision on important personnel matters of the Seconded Employees, such as the appointment/dismissal, reassignment, reinstatement or reward/punishment shall be made by consultation between t....
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....wing account designated by MCI by the end of the month following the month in which the invoice is received." 3. Article 3 and Article 20 of the aforesaid Agreement were amended w.e.f. 01.10.2007, and the amended Memorandum is reproduced below: Memorandum "Mitsui Prime Advanced Composites India Pvt. Ltd. ("ACI") and Mitsui Chemicals, Inc. ("MCI") hereby agree to revise and amend the Agreement Concerning the Treatment of Seconded Employees effective date on October 1st, 2007 between MCI and ACI ("Agreement") in accordance with the following terms and conditions: xxxxxxxxx 2. Article 3 shall be deleted in its entirety and replaced by the following: "3.1 Unless otherwise stipulated herein, ACI's rules of employment (work rules, working time, rest period, holidays, absence, etc.) shall in principle apply to the service of Seconded Employees. 3.2 MCI's rules of the employment shall be applied to those matters relating to the service of Seconded Employee, which are not provided for in ACI's rules of employment." 3. The first sentence of Article 20 shall be deleted in its entirely and replaced by the following: "MCI shal....
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....COMPANY's" appointed clinics or at government medical establishments. All medical and hospitalization entitlement shall be subject to the provisions of the "COMPANY" rules and policies. 9. SICK LEAVE: "EMPLOYEE" shall be eligible for an actual of 20 working days' paid sick leave in each calendar year. Sick leave from 3 consecutive days must be accompanied with doctor's certificate. 10. OBLIGATION: 1. The "EMPLOYEE" agrees to perform his assigned duties completely, conscientiously, efficiently, honestly and in accordance with the laeful orders of the "COMPANY" and to the expectation and high standard. II. The "EMPLOYEE" can not engage in any other activities with or without remuneration without the knowledge and prior consent in writing of the "COMPANY". III. The "EMPLOYEE" will comply with all employment rules and regulations and other lawful regulations and directives designated by the "COMPANY" from time to time, except, in the case of where this employment contract provides otherwise. IV. The "COMPANY" reserves the right to transfer or change the status and/or position of the "EMPLOYEE" but not to a lower category without any effect on remuneration and/....
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.... the employment such as designation of the transferred employee, salary to which he is entitled to, employment period etc. The Employment Contract executed with expats has similar covenants as mentioned in a regular employment contract between Mitsui India and its Indian employees. 8. The Employment Contract envisages the usual and customary clauses present in any contractual arrangement of employment. In terms of the Employment Contract, it is clear that the expats work in the normal capacity of a regular Indian employee. Some of the instances are: of such covenants are the Annual Leaves, Customary Holidays etc. the employees of Mitsui India are eligible for an similarly, the rules and regulations, employees are required to adhere to are: • Expats are eligible for the annual salary computed in Indian Currency. • All mandatory public holidays in India are applicable to expats also. • Expats are governed by normal working hours and sick leaves available to other Indian employees. • Expats are required to serve the mandatory notice period in the event of discontinuing the employment. • Expats are required to ad....
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....rts/Seconded employees by the noticee is liable to service tax under Reverse Charge Mechanism. 58. Thus, the said reimbursement does not affect the taxability of gross amount inasmuch as reimbursed amount also constitute gross payment towards the services received by ACI. Further it is on record that MCI have provided manpower (i.e. Japanese experts/seconded employees) to CI to assist their personnel in establishment and running of the assesse's company, therefore, any expenses incurred by the foreign service provider and reimbursed by them are definitely on account of services i.e. 'manpower recruitment or supply agency service' since Japanese experts/seconded employees worked for boosted the business of the assessee. If the said services were rendered by any unrelated agency then also the payment would have been on account of service as well as the administrative expenses of such agency. As already discussed above that the service receiver (i.e. ACI) and service provider (i.e. MCI) are separate entity. Thus, gross payment (including reimbursement) made to Japanese experts/seconded employees constitute gross taxable value of the said service liable to service tax under 'm....
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.... does not call for any interference. Learned authorized representative submitted that the issue involved in this appeal has been decided against the appellant by the Supreme Court in C.C., C.E. & S.T. - Bangalore (Adjudication) etc. vs. M/s. Northern Operating Systems Pvt. Ltd [Civil Appeal No. 2289-2293 of 2021 decided on 19.05.2022]. 11. The submissions advanced by the learned counsel for the appellant and the learned authorized representative appearing for the department have been considered. 12. A perusal of the Agreement indicates that; (i) Mitsui Japan shall assign certain of its employees to Mitsui India as officers or employees of Mitsui India and Mitsui India shall accept such employees who shall continue to be employee of Mitsui Japan; (ii) Rules of Mitsui India shall, in principle, apply to matters relating to the services of the seconded employees; (iii) Salary and bonuses payable to the seconded employees shall be paid by Mitsui Japan in accordance with their rules; and (iv) Mitsui Japan shall send to Mitsui India an invoice for the amount of the expenses incurred by Mitsui Japan in a month under the Agreement and Mitsui India shall be pay the invoice amount. ....
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....ed Act) requires that to fall within that description, (a) a person (the expression is not defined; however, by Section 3 (42) of the General Clauses Act, the term includes "any company or association or body of individuals whether incorporated or not"); (b) provides service (c) directly or indirectly, (d) in any manner for recruitment or supply of manpower, (e) temporarily or otherwise 44. The question is what are the services provided to the assessee, and by whom? Do they include the provision of services, through employees, by its overseas group companies or affiliates? After 01.07.2012, the definition of "service" underwent a change. Except listed categories of activities excluded from, or kept out of the fold of the definition, every activity virtually is "service". Now, by Section 65 (44), "service" means (a) any activity (b) carried out by a person for another (c) for consideration, and (d) includes a declared service (the term "declared service" is defined in Section 66E). 45. Section 65 (44), however, excludes from its sweep [by clause (b)], "a provision of service by an empl....
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....ewise, the employee has the discretion to terminate the relationship (Article II); (v) The overseas employer (group company) pays the seconded employee, which is reimbursed to the overseas company, by the assessee (Article III); (vi) The assessee is responsible for the work of the seconded employee, i.e., the overseas employer, during the secondment period, is absolved of any liability for the job or work of its seconded employees (Article VII); (vii) The secondment is for a specified duration, and the employment with the assessee ceases upon the expiration of that period (Article II of the secondment agreement and the "Duration" clause in the letter of understanding with the seconded employee); (viii) The letter of understanding issued to the seconded employee specifies that the tenure with the assessee is an assignment (in one place, the term used is "At its conclusion, repatriation will be in accordance with the Global Mobility Repatriation Policy"); (ix) The terms include the salary payable as well as other allowances, such as hardship allowance, vehicle allowance, servant allowance, paid leave, housing allowance, etc. The nature of ....
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....c edge (be it manpower or other resources availability) to perform the specific tasks given it, by the overseas company. As part of this agreement, a secondment contract is entered into, whereby the overseas company's employee or employees, possessing the specific required skill, are deployed for the duration the task is estimated to be completed in. This court is not concerned with unravelling the nature of relationship between the overseas company and the assessee. However, what it has to decide, is whether the secondment, for the purpose of completion of the assessee's job, amounts to manpower supply. 53. Facially, or to put it differently, for all appearances, the seconded employee, for the duration of her or his secondment, is under the control of the assessee, and works under its direction. Yet, the fact remains that they are on the pay rolls of their overseas employer. What is left unsaid- and perhaps crucial, is that this is a legal requirement, since they are entitled to social security benefits in the country of their origin. It is doubtful whether without the comfort of this assurance, they would agree to the secondment. Furthermore, the reality is that the seco....
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.... same weight." 57. Taking a cue from the above observations, while the control (over performance of the seconded employees' work) and the right to ask them to return, if their functioning is not as is desired, is with the assessee, the fact remains that their overseas employer in relation to its business, deploys them to the assessee, on secondment. Secondly, the overseas employer- for whatever reason, pays them their salaries. Their terms of employment - even during the secondment - are in accord with the policy of the overseas company, who is their employer. Upon the end of the period of secondment, they return to their original places, to await deployment or extension of secondment. 58. One of the arguments of the assessee was that arguendo, the arrangement was "manpower supply" (under the unamended Act) and a service [(not falling within exclusion (b) to Section 65 (44)] yet it was not required to pay any consideration to the overseas group company. The mere payment in the form of remittances or amounts, by whatever manner, either for the duration of the secondment, or per employee seconded, is just one method of reckoning if there is consideration. The other ....