TaxTMI 
TaxTMI 
2023 (11) TMI 1429
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd Repair Services, Renting of Immovable Property Services and Supply of Tangible Goods Service. They are registered with the Service Tax Commissionerate. 2. During the audit of accounts of the appellant by the audit team, it was noted that the appellant has entered into `Secondment Agreement' with M/s. Nissan Motor Company Ltd, Japan (hereafter referred to as Nissan, Japan) for obtaining employees to the appellant unit in India. 2.1 Some of the salient features of this agreement are as below: i. The appellant has entered into agreement with M/s. Nissan, Japan to provide secondee to fill the position and carry out work in India on a full time basis for the secondment period set in the agreement. ii. As per the agreement, the Secondee will continue to be an employee of M/s Nissan, Japan throughout the Secondment period. iii. M/s. Nissan, Japan has the right to replace the Secondee or change the Secondment period at any time by issuing a written notice to appellant after consultation. However, in case of retirement, resignation, death, disappearance, illness or injury of the Secondee, M/s. Nissan, Japan shall have the right to replace such Seconde....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and bear the costs and expenses incurred. xii. The termination of this agreement may be done by either party at its sole discretion by giving written notice to the other party where there is material breach of agreement and the other party fails to remedy the breach. The rights or obligation of the either party under this agreement shall be materially altered as the result of any act of relevant government authority in India. xiii. M/s. Nissan Japan has got sole discretion to terminate this agreement ifappellant becomes bankrupt, dissolved or liquidated etc. xiv. The Secondment agreement shall be governed by and construed in accordance under the laws of Japan. 2.2. The appellant had entered into a separate employment contract with the foreign expatriates, who were employed at the appellant unit pursuant to the Secondment Agreement. This agreement sets out the contract period, place of work, scope of duty, compensation, viz, Basic pay, Housing Allowance, Gas Allowance, along with other prerequisites like Housing, Schooling of accompanying children, Car for office and personal use, etc. The department was of the view that the expatriate employee provide....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... specified in the agreement. g. Nissan Motor Company Ltd, Japan has lien over the deputed employees. h. The services of the deputed employees in their home country have not been terminated. 2.6 It appeared to department that the deputation of foreign expatriates by Nissan, Japan to appellant company would fall under import of service, of Manpower Recruitment or Supply Agency Service. That the appellant is liable to pay service tax under Reverse Charge Mechanism (RCM) under Section 66A and Section 68 of Finance Act, 1994, read with Place of Provision of Service Rules 2012. According to department, the appellant company has to pay service tax on the entire remuneration paid to the foreign deputed employees. 2.7 The appellant while discharging the service tax under Manpower Recruitment and Supply Agency Service (MRSA) did not include the salary and allowance paid in Indian Currency to the deputed employees. The department was of the view that the appellant has to discharge service tax on the entire remuneration and not on that part of salary that is borne by Nissan Japan and reimbursed. According to Department, the appellant had short paid service tax for which....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ition of service tax charged, is equivalent to the consideration; (iii) In a case where the provision of service is for a consideration which is not ascertainable, is the amount as may be determined in the prescribed manner. 2) Where the gross amount charged by a service provider, for the service provided or to be provided is inclusive of service tax payable, the value of such taxable service shall be such amount as, with the addition of tax payable, is equal to the gross amount charged. 3) The gross amount charged for the taxable service shall include any amount received towards the taxable service before, during or after provision of such service. 4) Subject to the provisions of sub-sections (1), (2) and (3), the value shall be determined in such manner as may be prescribed. Explanation for the purpose of this section: (a) "consideration" includes any amount that is payable for the taxable services provided or to be provided Position of law post Finance Act 2015 amendment to the definition of Consideration effective from 14 May 2015: Explanation For the purposes of this section, (a) "consideration" i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rom the third party as a pure agent of the recipient of service are in addition to the services he provides on his own account. 3.3 The appellant wishes to submit that since the impugned salary payments are made directly to the employees and never charged by Nissan, Japan, the ground for the levy of service tax fails. 3.4 The SCN relies upon Rule 5 of the Valuation Rules and Section 67, alleging that expenditure/costs incurred by the Service Provider should be included in the taxable value. The said Rule 5(1) has been struck down by the Hon'ble Supreme Court in the case of UOI vs Intercontinental Consultants and Technocrats Private Limited Vs (2018 (3) TMI 357). Accordingly, it is submitted that for the period prior to the amendment of Section 67 (w.e.f14 May 2015) the demand of service tax on the salary paid to the seconded employees ought to be set aside. Later, Section 67 was amended w.e.f. 14 May 2015. Even after such amendment, service tax is applicable only on those costs that are charged by the Service Provider. In the instant case, as per the agreements the salaries paid in India are not to be charged to the Service Provider; and instead liable to be paid directly....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ng distinct persons. Various representations have been received seeking clarification on the taxability of activities performed by an office of an organization in one State to the office of that organization in another State, which are regarded as distinct persons under section 25 of Central Goods and Services Tax Act, 2017 (hereinafter referred to as 'the CGST Act'). The issues raised in the said representations have been examined and to ensure uniformity in the implementation of the law across the field formations, the Board, in exercise of its powers conferred under section168 (1) of the CGST Act hereby clarifies the issue in succeeding paras. 2. Let us consider a business entity which has Head Office (HO) located in State-1 and a branch office (BOs) located in other States. The HO procures some input service's e.g. security service for the entire organisation from a security agency (third party). HO also provides some other services on their own to branch offices (internally generated services). 3. The issues that may arise with regard to taxability of supply of services between distinct persons in terms of sub-section (4) of section 25 of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d BO, the value of such services may be deemed to be declared as Nil by HO to BO and may be deemed as open market value in terms of second proviso to Rule 28 of CGST Rules. 3. In respect of internally generated services provided by the HO to BOS, in cases where full input tax Credit is not available to the concerned BOs, whether the cost of salary of employees of the HO involved in providing said services to the BOs, is mandatorily required to be included while computing the taxable value of the said supply of services provided by HO to BOs. In respect of internally generated services provided by the HO to BOs, the cost of salary of employees of the HO, involved in providing the said services to the BOs, is not mandatorily required to be included while computing the taxable value of the supply of such services, even in cases where full input tax credit is not available to the concerned BO. 4. It is requested that suitable trade notices may be issued to publicize the contents of this circular. 5. Difficulty if any, in the implementation of this circular may be brought to the notice of the Board. Hindi version would follow." 3.10 Without prejudice, the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ondees, under which payments are directly made to the secondee, which is now proposed to be taxed by the Department. The Appellant is considered as the employer of these secondees for various purposes such as Labour laws, Professional tax and Income-Tax, Employment visa, etc. Even assuming that the employer of the secondees is the foreign company, it is submitted that the Appellant is to be considered as a joint employer. In such circumstances, the payments made directly to the employee by a separate contract and not charged by the foreign company ought not to be taxed. 3.15 Some of the seconded employees are also Directors of the Appellant company and any amount paid to such Directors cannot be subject to levy of service tax because the salaries paid to Directors are specifically excluded from the ambit of service tax vide Circular No 115/09/2009 -ST dated 31 July 2009. 3.16 The demand is made on the entire salary portion including the TDS. Service tax cannot be demanded on the income-tax TDS component. The Learned Counsel drew support from the following decisions to canvass this argument. a. Magarpatta Township Development and Construction Co Ltd Vs Commissioner of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en paying service tax on the salary amount borne by Nissan, Japan i.e., the amount paid to Nissan, Japan by appellant. The present demand is only on that portion of the salary paid to the deputed employee directly in Indian Rupees. The appellant was under bonafide belief that as the amount is paid directly in India, it cannot be included in the consideration of import of services. The issue being interpretational, the appellant cannot be saddled with the burden of suppression of facts with intent to evade payment of tax. 3.20 Further, the Learned Consultant adverted to various orders passed on the very same issue by different Commissionerates, and which have travelled up to the Tribunal. It is submitted by the Learned Consultant that in all these cases the department has raised the demand only on the amount that was paid by the assessee to the foreign company and have not raised any demand on that portion of the salary directly paid to deputed employee in Indian Rupees. The following decisions were relied to support this agreement. (i) M/s. Komatsu India Pvt Ltd Vs Commissioner of GST & CE, Chennai - 2021(10) TMI 1171 (ii) M/s. Cannon India Pvt Ltd Vs Commissio....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he salaries, bonus and allowances and other benefits directly paid in local currency. These amounts have to be included in the taxable value for discharging service tax under Manpower Recruitment and Supply Agency (MRSA) services. 4.4 The Learned AR, adverted to the secondment agreement to submit that the deputation would not have taken place if the salary and other benefits are not paid/or not agreed to be paid in Indian currency to the employee who is working in India. This is an important condition of the contract. Thus, the second contract entered by appellant with employees is only offshoot of the secondment agreement and not a separate independent agreement. The deputation/secondment of employees by foreign company to appellant company thus falls within the service of Manpower Recruitment or Supply Agency (MRSA) services, and the entire remuneration paid is subject to levy of service tax. 4.5 The Learned AR, submitted that the issue stands covered by the decision of the Hon'ble Supreme Court in the case of CC, CE & ST - Bangalore (Adjudication) Vs M/s. Northern Operating Systems Pvt Ltd., 2022 (5) TMI 967 (S.C). The said decision was followed by the Tribunal in the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t reversed the decision of the Tribunal and held that, as the foreign Company continues to be the employer, the activity of secondment/deputation of skilled employees to their unit in India will fall under Manpower Recruitment or Supply Agency Services. 6.3 However, in the case of Northern operating system, the seconded employees are to be entirely remunerated through the payroll of the foreign company. The assessee therein had to reimburse the foreign company, the entire salary, allowance and other perquisites paid by the foreign company to the seconded employees. It was held by the Apex Court that the amount so paid by the assessee to the foreign company is the consideration for providing Manpower Recruitment or supply Agency services and is subject to levy of service tax. The view taken by the Tribunal that an employer- employee relationship existed between the assessee and the seconded employee was negated by the Hon'ble Apex Court. The relevant paras are reproduced as under :- "33. The issue which this court has to decide is whether the overseas group company or companies, with whom the assessee has entered into agreements, provide it manpower services, for the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tter would be treated as the former's employees after the seconded period (which is usually 12-18 months). On the contrary, they revert to their overseas employer and may in fact, be sent elsewhere on secondment. The salary packages, with allowances, etc, are all expressed in foreign currency (eg. USS 330,000/- per annum in the letter produced before court extracted above). Furthermore, the allowances include a separate hardship allowance of 20% of the basic salary for working in India. The monthly housing allowance in the specific case was 366,700 In addition, an annual utility allowance of 23.97,500/- is also assured These are substantial amounts, and could have been only by resorting to a standardized policy, of the overseas employer 55. The overall effect of the four agreements entered into by the assessee, at various periods, with NTS or other group companies, clearly points to the fact that the overseas company has a pool of highly skilled employees, who are entitled to a certain salary structure- as well as social security benefits. These employees, having regard to their expertise and specialization, are seconded (a term synonymous with the commonly used term i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed) 6.4 In the case of Northern Operating Systems, the entire salary was paid by foreign company to the seconded employee and the assessee reimbursed the same including all expenses. The relevant part of the secondment agreement extracted in the judgment reads as under :- "DUTIES AND OBLIGATIONS OF NOS NOS reimburse expenses paid by NTMS as follows. During the Secondment Period, as defined in Appendix I and Appendix II hereto, NOS shall reimburse NTMS for the following amounts (collectively the "Reimbursable Expenses"). (1) All remuneration of the Employees, including but not limited to, salary, incentives and employment benefits of the Employees paid by NTMS, and (2) All out-of-pocket expenses incurred by the seconded Employees and reimbursed by NTMS including but not limited to, business travel expenses and other miscellaneous expenses, directly related to the secondment of the Employee. It is specifically agreed that the payments by NOS to NTMS shall be limited to actual costs incurred, including administrative costs, as may be reasonably attributable to payroll services provided by NTMS. Administrative cost for this purpose would be 1% of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....and, the service provider is Nissan Japan and the service recipient is the appellant. Though the appellant is the service recipient, as per Section 66A, the appellant is liable to pay the service tax under Reverse charge basis as the service provider is in non-taxable territory. Thus, the liability to pay the service tax is on Reverse charge basis (RCM). 6.8 Though sub clause (i) of subsection (1) of Section 67 uses the word 'consideration', the Finance Act 1994 does not provide any definition for the word consideration. Clause (a) of subsection (4) of Section 67 prior to 14.05.2015 merely stated as under :- "consideration" includes any amount that is payable for the taxable services provided or to be provided" 6.9 An amendment was brought forth in section 67 by adding an Explanation which reads as under :- "For the purposes of this section,- "consideration" includes- Any amount that is payable for the taxable services provided or to be provided; Any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such Circumstances, and sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....project period. Their salary and wages was paid by NLC. However, the same was reimbursed by NTPL. The original authority dropped the proceedings, holding that the activity does not fall under MRSA services. On appeal filed by department, the Tribunal by above said decision dt.30.3.2023 followed the decision of the Hon'ble Apex Court in the case of Northern Operating System and held that the activity is taxable under MRSA services. However, NLC (service provider- assessee) had contended therein that NTPL had reimbursed NLC only from June 2008 to 31.03.2011. That after 31.03.2011, NTPL was paying salary and wages directly to the deputed employees and was not reimbursed by NLC/assessee. The Tribunal upheld the demand of service tax on MRSA on merits, and remanded to verify whether NTPL had reimbursed NLC after 31.03.2011. It was observed by the Tribunal that, if the salary and wages are paid directly and not reimbursed by the assessee (NLC) the assessee would not be liable to pay service tax after 31.03.2011. The relevant paras read as under: .............. "13. From the above discussions, the appeal filed by the Department has to be allowed, on merits. However, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the Tribunal in the case of M/s. Boeing India Defence Ltd., reads as under: "12. We note that this issue with regard to non-payment of service tax on the reimbursable expenses travelled upto Hon'ble Apex Court wherein it got settled by the decision in the case of Union of India and Anr. v. M/s.Intercontinental Consultants and Technocrats Pvt. Ltd. [2018 (3) TMI 357 (S.C.) = 2018 (10) G.S.T.L. 401 (S.C.)] - 2018-VIL-11-SC-ST The Apex Court has held as per Section 67 (un- amended prior to 1st May,2006) or after its amendment with effect from 1st May,2006, the only possible interpretation of the said Section 67 is that for the valuation of taxable services for charging service tax, the gross amount charged for providing such taxable services only has to be taken into consideration. Any other amount which is not for providing such taxable service cannot be the part of the said value. It was clarified that the value of service tax cannot be anything more or less than consideration paid as quid pro quo for rendering such services. Accordingly, it was held that Section 67 of Finance Act, 1994 do not allow inclusion of reimbursable expenses in valuation of service rules. 6....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount is charged for providing `such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot be a part of that valuation as that amount is not calculated for providing such 'taxable service.' That according to us is the plain meaning which is to be attached to Section 67 (unamended, i.e., prior to May 01, 2006) or after its amendment, with effect from, May 01, 2006. Once this interpretation is to be given to Section 67, it hardly needs to be emphasised that Rule 5 of the Rules went much beyond the mandate of Section 67. We, therefore, find that High Court was right in interpreting Sections 66 and 67 to say that in the valuation of taxable service, the value of taxable service shall be the gross amount charged by the service provider `for such service' and the valuation of tax service cannot be anything more or less than the consideration paid as quid pro qua for rendering such a service. 6.1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ands are liable to set aside various penalty imposed are also not sustainable. 6.16 From the above, as per Section 67 of the Finance Act, 1994, only such expenses and costs charged by the service provider can be included in the taxable value. As already stated, this Bench in the case of M/s. Neyveli Lignite Corporation (supra) has considered the very same issue had held that if the salary is paid directly and borne by the assessee (not charged) the amount cannot be included in the taxable value and the demand cannot sustain. 6.17 The Ld. Consultant has been fair enough to draw our attention to a recent decision passed by this Bench in the case of M/s. Renault Nissan Automotive India Pvt Ltd. Vs Commissioner of GST & CE 2023(7) TMI & 35 Cestat Chennai. The facts of the said case reveal that part of the salary was to be paid by the foreign company (Nissan Motor Co., Japan) and the other part is paid directly to employee by the assessee. The part paid by foreign company is reimbursed by assessee in Japanese Yen to foreign company. Though, the Tribunal extracted Section 67 in para 13.3 of the order, the issue as to valuation as under Section 67 has not been discussed specifically....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ronounced in court on 11.12.2023) (M. AJIT KUMAR) Member (Technical) (SULEKHA BEEVI C.S.) Member (Judicial) Per Contra M. Ajit Kumar, 12. I have had the advantage of perusing the judgment of the learned Member Judicial Ms. Sulekha Beevi C.S. and I regret my inability to agree with her. 13. I find that this is a case where the dispute is regarding valuation, for purposes of determining and quantifying the service tax payable on the service rendered. The period involved is from October 2008 to Jan 2014 involving a demand for service tax of Rs 10,97,75,229/. 14. Brief facts are that Nissan Motors India Private Limited (Appellant) have entered into a secondee / deputation agreement with Nissan Motor Co Ltd, Japan (Nissan) for obtaining employees of the Japanese company for working in the Appellant's unit in India. A dispute has arisen regarding the value to be adopted for the Manpower Recruitment or Supply Agency Service rendered by the overseas supplier. 15. There is no dispute by the contesting parties regarding the fact that the service rendered by the overseas employer (Nissan) is a taxable service of 'Manpower Recruitment or Supply Agency Service....
X X X X Extracts X X X X
X X X X Extracts X X X X
....- by the overseas group company to the assessee." 17.1 Some of the important points figuring in the Secondee agreement between the Appellant and Nissan Japan, other than those listed at para 2.5 above, are :- A. Nissan shall instruct the Secondee to carry out the work specified under the guidance, direction and supervision of the Host company (Appellant). The secondee shall abide by the host Co's internal Rules but shall enjoy extra holidays and leave as set out. B. Salary of Secondee will be decided by Nissan. The amount may be revised by Nissan at the behest of Nissan's fiscal year. C. During the period of deputation in India, the entire salary, including the home country salary and host country salary of the secondee shall be paid by the Host Company. D. Bonus and Allowances shall be paid to the Secondee as per the applicable laws and policies of Nissan and the Host Company. E. Termination of the Agreement caused by either Party's breach or non-performance of this Agreement shall not affect the right of the other Party to claim the breaching or non-performance of Party to pay damages arising from such breach, non-perfor....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... appellant to the secondee in India will not form a part of consideration and cannot be taken for the purpose of computing the value of the service. 19.3 Every agreement that is enforceable in law is a contract in the realm of private law. All conditions including 'consideration', 'breach', 'non-performance' etc. are to be understood between the parties accordingly. Its understanding is governed by the provisions of the Contract Act. Since the definition of consideration in a special act like FA 1944 is an 'inclusive' one, it would be beneficial to look at the definition of the said term under the Indian Contract Act, 1872 also before reverting to FA 1994. In this case the Contract Act complements the provisions of FA 1994 in understanding the term 'consideration'. `Consideration' as given under section 2(d) of the Indian Contract Act, 1872 states. (d) When, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise; (em....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... (i) any amount (ii) that is payable (iii) for the taxable services (iv) provided or to be provided The nature and substance of the Agreement is with regard to a proposal for deputation / supply of secondees to the Appellant made by Nissan and sets the terms and conditions for the same. The quid-pro-quo for the secondment agreement, (as mentioned in Northern Operating System (supra)), where the appellant has the benefit of experts for limited periods, is implicit in the overall scheme of things. Hence, as rightly pointed out by the learned AR, any amount that is payable to the overseas supplier of manpower for the taxable service, if paid or payable directly or indirectly to the secondee at the behest of the supplier i.e. by both the overseas supplier (reimbursable) plus the Appellant, represents the gross consideration for the service provided or to be provided. Since if this gross amount is not agreed to be paid the deputation would not have taken place and the Agreement would not be operable or if operative one of the parties to the contract could sue the other for damages for a breach or non-performance of the agreement as mentioned in the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xable services for which value is sought to be determined" ***** ***** ***** 16. In fact, the definition of "gross amount charged" given in Explanation (c) to Section 67 only provides for the modes of the payment or book adjustments by which the consideration can be discharged by the service recipient to the service provider. It does not expand the meaning of the term "gross amount charged" to enable the Department to ignore the contract value or the amount actually charged by the service provider to the service recipient for the service rendered. The fact that it is an inclusive definition and may not be exhaustive also does not lead to the conclusion that the contract value can be ignored and the value of free supply goods can be added over and above the contract value to arrive at the value of taxable services. (emphasis added) The Apex court has hence clarified that the word "gross" indicates that it is the total amount charged in the agreement / contract without deduction of any expenses, the Department cannot go beyond the contract value. The stand taken above is in conformity with the judgment. Hence consideration is the gross amount paid to the secon....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Northern Operating Systems (supra), it would be unnatural to expect the overseas employer to not seek reimbursement of the employees' salaries, since they were, for the duration of secondment, not performing tasks in relation to its activities or business. A look at the secondee Agreement shows that the appellant company has accepted the promise of Nissan for services of skilled employees on payment of the gross amount charged by Nissan as per certain conditions including a split formula to be decided by Nissan, for payment of salary. However as per the desire of Nissan, the consideration equal to salary to the deputed employees is to be paid partly by the Appellant and partly by Nissan while the secondee remains on the rolls of Nissan. The portion paid by Nissan is reimbursed by the Appellant to Nissan in foreign currency. During the period of deputation of the secondee in India, the entire salary, including the home country salary and host country salary of the secondee shall be paid by the Host Co. (Appellant). A clause of the Agreement states that the contribution to the Japanese social security system will be borne by Nissan of the deputed employees. The contribution to t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....bove, due to the obligation of the overseas employer to maintain the secondee on its payroll, shows that the consideration is agreed upon by Nissan and the Appellant to compensate Nissan for maintaining the secondee / deputed employees on its payroll, which is a financial burden to Nissan and the cost of which is incurred by them. As stated earlier the appellant has acquiesced to paying tax on the payments made by Nissan to the secondee abroad as a part of the Agreement. The principle of equivalence is in-built into the concept of service tax and the different colour or name of the currency or the formula / route adopted for making / paying the agreed consideration to the overseas service provider, cannot change its nature and substance. Hence the appellants plea does not succeed. 20. Whether reimbursable charges are to be included in the value on which tax is collected. 20.1 The next issue for consideration is the reimbursable payment's made by the appellant to the secondee employees' in the form of allowances. The nature and substance of the allowances which are statedly reimbursable has not been discussed elaborately by either of the parties before us. It is the vi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ated that, the demand of the service tax was being computed on the salaries and allowances paid to the employees. That any cost or expense reimbursed does not represent the gross value of taxable service and cannot be a consideration for charging service tax. This view did not find favour and the Hon'ble Supreme Court, who while discerning the true nature of the relationship between the seconded employees and the assessee, made a co-joint reading of the terms and found that the salary payable as well as other allowances, such as hardship allowance, vehicle allowance, servant allowance, paid leave, housing allowance, etc. underscore the fact that the seconded employees are of a certain skill and possess the expertise, which the assessee requires. It also observed that it is doubtful whether without the comfort of this insurance, the deputed employees would agree to the secondment. The Hon'ble Court applied the test of substance over form and held revenue's appeals to succeed and the assessee was held liable to pay service tax. Judicial discipline requires that the Apex Courts judgment in Northern Operating System be followed more so in the case of overseas Manpower Suppl....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tire payment was made in foreign currency whereas in their case a part of the salary including the reimbursable charges of the allowances of the secondee was being paid by them directly in Indian Rupees. Hence, all reimbursable charges would not find a part of the assessable value. 20.7 I do not find any merit in this argument. Firstly it has been discussed both in the context of the Indian Contract Act and FA 1994 that the amounts paid by the Appellant is only the consideration as per the Agreement for the services to the service provider which are "equivalent to the salaries of the seconded employees", they do not amount to being the salary itself. Secondly the paramount test of understanding an Agreements is ` the intention of the parties' as stated by the Supreme Court in a catena of cases. Taking a cue from various Supreme Court judgments the question to be asked is did the parties have in mind or intend separate rights arising out of payments to the secondee made is foreign currency and separate rights for payment in Indian Rupees. If there was no such intention, then in this case the Agreement was an indivisible contract. 20.8 I find that the consideration paid by ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mposed. Collection of tax is normally a stage subsequent to the levy of the same. The enforcement of levy could only mean realisation of the tax imposed or demanded. Collection is part of the machinery provision, the method or point of collection of duty does not affect or influence the value to be adopted for the service being rendered, which is a part of assessment of the service. The point of collection of tax is framed for administrative convenience and has to be read harmoniously so as to not defeat the levy. The POTR only determines the point of collection of the tax and is not useful in understanding the valuation of services done as a part of assessment of the taxable service rendered. As held in Intercontinental Consultants and Technocrats (supra): 26) It is trite that rules cannot go beyond the statute. In Babaji Kondaji Garad, this rule was enunciated in the following manner: "Now if there is any conflict between a statute and the subordinate legislation, it does not require elaborate reasoning to firmly state that the statute prevails over subordinate legislation and the bye-law, if not in conformity with the statute in order to give effect to the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nts by unscrupulous parties to camouflage the real intention of the parties, leading to tax evasion. 2) It would be discriminatory and violative of Art. 14 of the Constitution inasmuch as it creates a discrimination between two sets of assessee who are service recipients of secondee's provided by overseas supplier's but who have either to pay tax or are exempted from it only due to the colour or name of the currency they pay the secondees with, for the same service. 20.11 In Intercontinental Consultants and Technocrats (supra) cited by the appellant it was stated as under: "24. In this hue, the expression 'such' occurring in Section 67 of the Act assumes importance. In other words, valuation of taxable services for charging service tax, the authorities are to find what is the gross amount charged for providing `such' taxable services. As a fortiori, any other amount which is calculated not for providing such taxable service cannot a part of that valuation as that amount is not calculated for providing such 'taxable service'." The Hon'ble Supreme Court in the said judgment stated that the authorities are to find what is the gro....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 68. 1 [Payment of service tax (1) Every person providing taxable service to any person shall pay service tax at the rate specified in section 4[66B] in such manner and within such period as may be prescribed. (2) Notwithstanding anything contained in sub-section (1), in respect of any taxable service notified by the Central Government in the Official Gazette, the service tax thereon shall be paid by such person and in such manner as may be prescribed at the rate specified in section 4[66B] and all the provisions of this Chapter shall apply to such person as if he is the person liable for paying the service tax in relation to such service.] [Provided that the Central Government may notify the service and the extent of service tax which shall be payable by such person and the provisions of this Chapter shall apply to such person to the extent so specified and the remaining part of the service tax shall be paid by the service provider.] **************** Notes : 1. Substituted by the Finance (No. 2) Act, 1998, w.e.f. 16- 10-1998. Earlier section 68 was amended by the Finance (No. 2) Act, 1996 and later on substituted by the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....;s rules and policies d) The expatriate employee would report to the team manager of the appellant company e) The appellant has the right to terminate the employment of the expatriate employee f) The appellant would be responsible for the appraisal of the work done by the expatriate employee g) The jurisdiction governing the Employment Contract is that of India I now examine the 'test' prescribed by the Appellant with the facts as on record in the agreements, on a point-by-point basis: a) As per Article 2 of the 'Secondment Agreement', Nissan shall instruct the Secondee to carry out the work specified ("Work") under the guidance, direction and supervision of the Host Company. Thus, the appellant has operational or functional control over the secondee as is available to any service recipient of man power, which they exercise by way of guidance, direction and supervision of the secondee, who has to abide by the Appellants internal Rules. The Appellant has no other control on the secondee. b) The Appellant is obliged to pay Nissan the consideration as per their Agreement with them for the secondment of manpower. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant does not have the right of immediate or unilateral termination of the employment of the secondee as per Article 1.4. They have to give a six-month prior written notice based on reasons which must satisfy a limited set of conditions set out in the Agreement and await Nissans agreement to the proposal. This is hardly in the nature of an employer employee relationship. f) The appellant is responsible for the appraisal of the work done by the expatriate employee so that they can submit the same to Nissan as an important reference in secondee evaluation by Nissan. A poor appraisal report is not a ground mentioned in Article 1.4, for the Appellant seeking the termination of the employment of a secondee. g) That the jurisdiction governing the Employment Contract is of India is not decisive of the employer - employee relationship but is for administrative convenience of the contracting parties. The Appellant is hence seen to have failed his own test for employer - employee relationship. 23. Whether the appellant is a joint employer of the secondee Having being doubtful of an employer-employee relationship the Appellant in their `synopsis' have propose....
X X X X Extracts X X X X
X X X X Extracts X X X X
....law well. That apart it has not been demonstrated from facts on record as to how Nissan being the actual employer of the secondees can be considered as a broker or an agent or any other person who arranges or facilitates a provision of a service on behalf of the principal i.e. Nissan. An intermediary merely acts for his principal. Prima facie nothing is on record to show that Nissan is an 'intermediary' employed to do any act for another, or to represent another in dealings with third persons. They are, as per their actions being examined in the impugned dispute, seen to be employers of the secondees as a 'principal'. Hence this submission has no legs to stand on. While, it may be sportive or perhaps at times even necessary to fish in muddy waters the same cannot be said if one were to muddy the waters before fishing. 25. Service tax cannot be demanded on the TDS component of Income Tax. The appellant has also taken a stand saying that TDS deductions should not form a part of the value. Section 67 of the Finance Act, 1994 stipulates that the value of any taxable service should be the gross amount charged by the service provider. I find that section 67 (2) of F....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ax assessee for providing a taxable service. Income tax deducted at source is includible in the charged amount. Therefore, service Tax is payable on the gross amount including the amount of Income Tax deducted at source also. A 'Disclaimer' information is seen in the booklet stating that the clarifications are purely as a measure of public facilitation, and that the Directorate General of Service Tax, Mumbai does not hold itself liable for any consequences, legal or otherwise, arising out of the use of any such information. Such a clarification without discussing the legal nuances involved cannot be the source of taxability or otherwise. I find that the TDS paid/deposited to the government by the appellant arises out of a statutory liability. In the normal course TDS cannot be held to be a 'consideration' for the service unless specifically mandated/ deemed by law. No such provision of law for the inclusion of TDS in the value for purposes of calculating Service Tax has been brought to notice. Hence in case such amounts have entered into the calculation of value the same should be deleted and duty reworked. 26. Lack of uniformity among field formations 26.1....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... cited by the appellant :- (i) Intercontinental Consultants and Technocrats Pvt. Ltd. Vs. Union of India and Anr. - 2018 (3) TMI 357 (ii) Commissioner of CGST, Mumbai Vs. Vantage International Management Company - 2021 (87) GSTR 358 (iii) Greatship (India) Ltd. Vs. Commissioner of CGST and Central Excise, Mumbai Central - 2021 (9) TMI 1173 (iv) SBI Life Insurance Vs. Principal Commissioner of CGST - 2022 (7) TMI 457 (v) Principal Commissioner of CGST, Delhi South Vs. Boeing India Defense Pvt. Ltd. - 2023 (5) TMI 523 (vi) Commissioner of CE & ST, LTU, Chennai Vs Neyveli Lignite Corporation Ltd (NLC) [2023-VIL 500 CESTAT CHE CHE-ST] b. Case laws cited by the Respondent-Revenue :- (vii) Commissioner of Central Excise, Bangalore Vs. Northern Operating Systems Pvt. Ltd. - 2022 (5) TMI 967 - Supreme Court (viii) Renault Nissan Automotive India Pvt. Ltd. Vs. Commissioner of CGST & Central Excise - 2023 (7) TMI 635 - CESTAT, Chennai (ix) Dell International Services India Pvt. Ltd. Vs. Commissioner of Central Excise, Bangalore - 2023 (2) TMI 183 - CESTAT Bangalore (x) M/s Chemplast Sanmar Ltd ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant in this case relies on distinguishing the payments made abroad and in India. Whereas in the impugned case the overseas manpower supplier is the same as that of 'Renault Nissan Automotive (supra) and the agreement and issues are near identical. 27.3 It is seen that all the judgement of the Tribunal referred to by the Appellant are bound by the law as declared by the Hon'ble Supreme Court in Northern Operations Ltd. (supra) regarding taxability of secondee's supplied by overseas manpower suppliers. The said judgment is a precedent for what is held and not for what could be inferred. Inferring that the judgment is based on the fact that the appellant in that case paid for the services in foreign currency is not correct. No such declaration has been made in the judgement and a passing one-line reference to the fact regarding payments for the service being made in foreign currency cannot be torn and used to label the entire transaction. It was also seen that the judgement was rendered after examining the judgment in Intercontinental Consultants and Technocrats and hence its ratio has to be followed in this case. 27.4 I find that the true ratio of each judgment ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ces relating to overseas suppliers, unlike supply of manpower where both supplier and recipient of service are within the taxable territory, has been a complex one and has found clarity after the judgment of the Hon'ble Supreme court in Northern Operating Systems (P) Ltd (supra) decided on 19/05/2022, where the demand pertains to the earlier period. In such a situation suppression of facts with an intention to evade duty is not established and cannot be alleged on the Appellant and the demand is to be limited to the normal period. I hence agree with the Appellant that invocation of extended period and imposition of penalty in the impugned situation is not justified. It is also clarified that interest on delayed payments in the normal period is necessarily linked to the duty payable, such liability arises automatically by operation of law. As per the Hon'ble Supreme Court's judgment in Commissioner of Central Excise, Pune Vs M/s SKF India [2009-TIOL-82-SC-CX] interest is to be paid on delayed or deferred payment of duty for whatever reasons. Hence interest if any on duty demanded during the normal period needs to be paid. 31. Summary For the sake of clarity and com....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in fulfillment of the conditions of the Agreement reflecting the desire of Nissan Japan. The mode of the Appellant paying the consideration by splitting it as per the desire of Nissan must not be confused with the payment of salary of the secondee who is on the pay roll of Nissan. This view finds strength from the observations of the Apex Court in Northern Operating Systems (supra) that the assessee paid (through Operating Systems (supra) that the assessee paid (through reimbursement) the amounts 'equivalent to the salaries' of the seconded employees. G. The consideration is agreed upon by Nissan and the Appellant to compensate Nissan for maintaining the secondee / deputed employees on its payroll, which is a financial burden to Nissan and the cost of which is incurred by them. H. The principle of equivalence is in-built into the concept of service tax and the colour or name of the currency or the formula / route adopted for making / paying the consideration, cannot change the nature and substance of the consideration. I. The issue regarding including reimbursable costs was examined by the Hon'ble Supreme Court (3 Judge Bench) in Northern Operating System (supr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....RCM all payments made by the receiver of service, who is deemed to be the provider of service, towards the salary and advances of the secondee (both in Indian and foreign currency) would form a part of the assessable value on which duty has to be levied. 0. The Appellant is seen to fail the 'test', as suggested by them for establishing their relationship to the secondee as are of employer- employee. P. As per the Judgment of the Supreme Court in Jain Bros. & Others (supra), the Constitution does not contain any prohibition against double taxation and there can be double taxation if the legislature has distinctly enacted it. No such provision has been brought to notice regarding TDS. In the normal course TDS cannot be held to be a 'consideration' for the service unless specifically mandated/ deemed by law. Hence in case such amounts have entered into the calculation of value the same should be deleted and duty reworked. Q. If an illegality or irregularity has been committed in favour of any individual or a group of individuals or a wrong order has been passed by a judicial forum, others cannot invoke the jurisdiction of the higher or superior Court for repea....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments paid by the `appellant to secondees in India on Indian Rupees will form part of consideration as under Section 67 of the Finance Act, 1994 for the services of MRSA provided by Nissan Japan to the appellant. or (ii), Whether payments of part of salary to secondees in Indian Rupees will form part of 'gross amount charged' for arriving at the taxable value. 35. Heard the Id. Counsel for the appellant as well as the Special Counsel for the Revenue on the above stated points and also perused the respective opinions recorded by both the Id. Members. 36. Though the facts of the case have already been recorded by the Members of the Original Bench, therefore, I shall not repeat the entire facts. But briefly issues involved are that the appellant who is engaged in the business of sales, marketing and distribution of automobile products dealt by Nissan Group entities. The appellant employed certain expatriates to whom salaries, bonus and allowances were paid directly in India. In addition, certain reimbursements of social welfare cost incurred by NML were made. Due service tax was discharged on such reimbursements made to NML and the only issue involved i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....iii) Demand of service tax on income tax TDS to be reduced from the total demand as they cannot be held as consideration for the services (refer para 25 of the Interim Order). 39.1 The learned Counsel for the appellant has summarized the views of both the Members on the issues of difference in a tabulated form as under: S. No. Points of difference Brief view of the Member (J) Brief view of the Member (T) 1. Whether part of the salary 1 emoluments paid to secondees in India in Indian Rupees will form part of consideration under Section 67 of the Finance Act f1994 for the services of MRSA provided by Nissan Japan to the appellant. The Member (J) observed that only such expenses and costs charged by the service provider can be included in the taxable .value as per Section 67 of the Finance Act. Therefore, costs not charged by the appellant to Nissan Japan cannot be subject to service tax. (para 6.16 of the Interim Order) The Member (T) held salary payments to secondees will form part of consideration as payments made to secondees is only an arrangement for paying the consideration as per the desire and behalf of Nissan. (para 20.4 of the Interim Order) 2.....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid by the appellant and not charged by NML, cannot be brought to tax. 39.5 He also refers to the ruling of the co-ordinate bench of the Tribunal in the case of Renault Nissan Automotive India Pvt Ltd vs. Commr of CGST - [FINAL ORDER NO. 40436/2023 dt. 15.06.2023 CESTAT CHENNAI]. The Id. Member (J) also cited this ruling in her findings and held that the said ruling does not specifically discuss the issue as to valuation and also observed that the said decision is per incuriam. 39.6 The Id. Counsel for the appellant further submits that the view taken by the Member (T) is erroneous as he has travelled beyond the scope of show cause notice and Order-in-Original. He also submits that it is a settled law that the department cannot travel beyond the show cause notice and cannot set up a case which is not in the show cause notice. He also submits that the Member (T) at para 19 of the Interim Order has completely overlooked the employment agreement between the appellant and the secondees. 39.7 He further submits that the Member (T) fails to distinguish between a condition to the contract and consideration for the contract. He has relied on the decision of the Tribunal in the cas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....amounts paid directly to the secondees by the appellant were 'billed' in Indian Currency and therefore, proceeds to invoke provisions of the Point of Taxation Rules. In this regard, the appellant reiterates that it is an undisputed fact that such salaries and emoluments paid to the secondees were neither billed/charged by NML on the appellant nor paid by the appellant to NML. Hence, when the entire emoluments were paid through the payrolls of the appellant, the demand of tax on such payments ought to be dropped. 39.14 He further submits that the Member (T) has disregarded the precedential value in the case of M/s Boeing India Defense Private Limited (supra) by merely citing that no discussion on the decision in the case of Northern Operating Systems (P) Ltd (supra) was made in the said ruling. He further submits that the said ruling was appealed by the Revenue before the Hon'ble Apex Court, which dismissed the appeal and upheld the decision of the Tribunal on non-taxability of payments made directly to the employees. 39.15 He further submits that the Member (T) has not accepted the relationship between the appellant and the secondees as employer-employee relations....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Member (T) at para 19.7 of the Interim Order has also cited the judgment of Hon'ble Apex Court in the case of CST vs. Bhayana Builders Pvt Ltd - 2018 (10) GSTL 118 (SC), wherein he has examined the phrase 'the gross amount charged by the service provider for such service provided or to be provided by him' as per Section 67 of the Finance Act, 1994. 40.4 He further submits that it is clear from the agreement that Nissan dictates the terms of employment of the deputed employees to the appellant and the appellant has no discretion to vary the terms of employing the deputed employees. 40.5 He further submits that the decision of the Hon'ble. Apex Court in the case of Northern Operating Systems (P) Ltd (supra) is applicable in the present case also. 40.6 He also submits that the Member (T) has agreed that in the normal course TDS cannot be held to be a 'consideration' for the services and hence, such amount should be deleted and duty reworked. 40.7 He also submits that the Member (T) has summarized his findings at para 31 of the Interim Order wherein he has again cited the decision of Hon'ble Supreme Court in the case of Bhayana Builders Pvt Ltd ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....994, which envisages a levy on the 'gross amount charged' and the judgments of Hon'ble Supreme Court in the case of Bhayana Builders Pvt Ltd (supra) and also in the case of Northern Operating Systems (P) Ltd (supra). 44. . I also find that the Id. Member (T) has elaborately dealt with the concept of consideration as defined in the Contract Act, 1872 and the gross amount charged which is paid by the appellant to Nissan for supply of manpower services. It is pertinent to reproduce the said findings of the Id. Member (T) from para 19.6 to para 19.12, which are reproduced herein below: "19.6 With the above understanding under the Contract Act, the issue can be examined under FA 1994. Section 67 of the finance act, 1994 has an inclusive definition of the term consideration. Section 67(4)(a) during the relevant time stated that consideration includes any amount that is payable for the taxable services provided or to be provided. Therefore, the following elements must be present to constitute a valid consideration, namely: (i) any amount (ii) that is payable (iii) for the taxable services (iv) provided or to be provided ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h service tax is payable. b. The amount charged should be for "for such service provided": Section 67 clearly indicates that the gross amount charged by the service provider has to be for the service provided. Therefore, it is not any amount charged which can become the basis of value on which service tax becomes payable but the amount charged has to be * necessarily a consideration for the service provided which is taxable under the Act. By using the words "for such service provided" the Act has provided for a nexus between the amount charged and the service provided. Therefore, any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. The cost of free supply goods provided by the service recipient to the service provider is neither an amount "charged" by the service provider nor can it be regarded as a consideration for the service provided by the service provider. In fact, it has no nexus whatsoever with the taxable services for which value is sought to be determined" ***** ***** ***** 16. In fact, the definiti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a contract in the realm of private law. The term 'billed' has to be understood in terms of the Agreement entered into by the Appellant with the overseas manpower supplier and is examined at para 20.9 below. Further the judgment states that any amount charged which has no nexus with the taxable service and is not a consideration for the service provided does not become part of the value which is taxable under Section 67. In this case, as will be seen, the gross amount charged has clear nexus with the taxable service and is a consideration for the service provided and hence becomes a part of the value which is taxable under Section 67. 19.10 It is the Appellants contention that the amount paid by the Appellant directly to the seconded employees in Indian Currency is not 'charged' by Nissan on the appellant and hence will not form part of the assessable value. This is a play of semantics. It is seen from the section reproduced above that the gross amount charged by the service provider is in the context of such service provided or to be provided by him. As stated by the Apex Court in Northern Operating Systems (supra), it would be unnatural to expect the overs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....quences: one, that the seconded employees continued on the rolls of the overseas employer; two,since they were not performing jobs in relation to that employer's business, but that of the assessee, the latter had to ultimately bear the burden. There is nothing unusual in this arrangement, given that the seconded employees were performing the tasks relating to the assessee's activities and not in relation to the overseas employer. To put it differently, it would be unnatural to expect the overseas employer to not seek reimbursement of the employees' salaries, since they were, for the duration of secondment, not performing tasks in relation to its activities or business. (emphasis in italics as per original. Portion underlined by me) 19.12 This reinforces the view that the consideration as per the Agreement for using the services of the secondee (beneficiary of the consideration) consists of the payment of the full amount of salary, bonus and allowances i.e. both in foreign currency and in Indian Rupees as per the desire of the supplier. The two consequences, pointed out by the Hon'ble Court above, due to the obligation of the overseas employer to maintain the se....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issue in details keeping in view the terms and conditions of the agreement and has . held that the appellant has failed to prove the relationship of employer and employee in the present case. 47. As regards the submission of the appellant that Nissan is an intermediary and not liable to pay service tax as per Place of Provision of Service Rules, the Id. Member (T) has also examined this issue and has negated the same. The Id. Member (T) has also distinguished the judgments relied upon by the appellant. The Id. Member (T) has heavily relied on the judgment of the co-ordinate bench of the Tribunal in the case of Renault Nissan Automotive India Private Limited (supra), which relates to sister concern of the appellant and the appellant in that case entered into secondment agreement with Nissan Japan (the same manpower supplier as in the instant case), which is merely identical with that in the present case. After examining the relevant decisions of the Hon'ble Supreme Court, the co-ordinate bench in the case of Renault Nissan Automotive India Private Limited (supra) held that the service tax was payable on manpower supply services. The Id. Member (T) has observed that judicial ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... decision in the case of M/s. International Merchandising Company, LLC (supra), the Hon'ble Apex Court has observed as under: - "8. The Commissioner ruled that the consideration paid to FSE for appearance of VA for a sports tournament is taxable under the definition of "manpower recruitment or supply agency". The Commissioner observed that the source of supply of skilled manpower is outside India and has been received by the appellant in India. The Commissioner further ruled that any programme made by a programme producer and then offered for sale to different TV channels or broadcasters for relay is a taxable activity. The Commissioner concluded that the transaction made by the appellant with Zee Telefilms includes element of service and is taxable. 9. Aggrieved by the order of the Commissioner, the appellant lodged appeals before the Tribunal. The Tribunal by its judgment dated 29 May, 2020 held against the appellant. It observed that the services provided by FSE were in the nature of supplying, recruiting, and providing players for sport events organized by the appellant. It held that such services will be covered under the definition of "manpower recruitme....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on does not incorporate such a requirement or condition. ........... 17. ...... But it does not postulate that such a relationship must exist for the statutory definition to be attracted. Hence, the fact that there may be no relationship of employment between VA and FSE would not be dispositive for the purposes of the statutory definition in Section 65(68). For the above reasons, we are of the view that the decision of the Tribunal on this aspect of the matter cannot be faulted with." 13.6.4 In the decision in the case of M/s. Northern Operating Systems Pvt. Ltd. (supra), which is decided by the Three- Judge Bench of the Hon'ble Supreme Court, the relevant observations of the Hon'ble Court are as under: - "11. The CESTAT then, on an examination of the agreements, interpretation of documents on record (including the agreements entered by the respondent with its group company), held that the subject matter of the contract was not supply of manpower. The group companies were not engaged in supply of manpower. The CESTAT held that those seconded to the assessee working in the capacity of employees and receiving salaries by group companies wer....
X X X X Extracts X X X X
X X X X Extracts X X X X
....above features show that the assessee had operational or functional control over the seconded employees; it was potentially liable for the performance of the tasks assigned to them. That it paid (through reimbursement) the amounts equivalent to the salaries of the seconded employees - because of the obligation of the overseas employer to maintain them on its payroll, has two consequences : one, that the seconded employees continued on the rolls of the overseas employer; two, since they were not performing jobs in relation to that employer's business, but that of the assessee, the latter had to ultimately bear the burden. There is nothing unusual in this arrangement, given that the seconded employees were performing the tasks relating to the assessee's activities and not in relation to the overseas employer. ........ ....... ....... 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 c....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....7 We find from the clauses of the SA in the case on hand, which are extracted elsewhere in this order, that the terms and conditions and scope of the SA is more or less identical to that of the assessee before the Hon'ble Apex Court in the case of M/s. Northern Operating Systems Pvt. Ltd. (supra). 13.8 The above decisions of the Hon'ble Apex Court, according to us, clearly hold that the definition of manpower recruitment or supply agency is wide enough to include `recruitment' as well as 'supply' of manpower. The expression 'supply' is of a wider connotation than recruitment. We are therefore of the view that the ratio of the above rulings squarely apply to this case and thus, there is no escape for the appellant before us from Service Tax liability in respect of manpower recruitment or supply agency service under reverse charge mechanism. 13.9 As such, we hold that the appellant is required to pay applicable Service Tax for the normal period along with interest. However, we agree with the contention of the appellant there is no suppression of facts involved and that being the case, the penalties imposed are set aside." 50. In view ....