TaxTMI 
TaxTMI 
2023 (3) TMI 1619
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....respondent, along with Tamil Nadu Electricity Board (TNEB), entered into a Joint Venture Agreement dated 09.06.2005, by which the Joint Venture Project, namely, M/s. NLC Tamil Nadu Power Limited (hereinafter referred to as "NTPL") was created. From May 2008, NTPL is in the process of implementation of 2 x 500 MW power project at Tuticorin. The respondent's personnel having the requisite functional expertise for execution of the power project were posted at the NTPL project site and their salary and wages were paid by NLC. However, the same was reimbursed by NTPL. 3. It appeared to the Department that the system of temporary supply of skilled manpower fell within the scope of "manpower recruitment or supply agency" service as defined under Section 65(68) of the Finance Act, 1994 read with Section 65(105)(k) ibid. NLC had not discharged any Service Tax on the salary and wages reimbursed by NTPL for the period from June 2008 to 31.03.2011 and 01.04.2011 to 31.03.2012. 4. Show Cause Notice No. LTUC/326/2012-C dated 17.09.2012 was issued to the respondent proposing to demand the Service Tax along with interest and also for imposing penalties. After due process of law, the Original....
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....d, in paragraph 8.6.1 of the impugned order, that the core business activity of NLC is excavation of lignite and by no stretch of imagination it could be said to be a commercial concern supplying manpower to its clients, either directly or indirectly. She asserted that even if the primary objective of an institution/organization is different, if the nature of the activity undertaken by them comes within the ambit of a taxable service, then such institution/organization is liable to pay Service Tax. That even though the core business activity of NLC may be excavation of lignite, the act of permitting its employees to work for NTPL is in the nature of supply of manpower falling within the definition of "manpower recruitment or supply agency" service. 5.2.3 To support her arguments, she relied upon the decision in the case of M/s. Carborandum Universal Ltd. v. Commissioner of Central Excise, Chennai [Final Order Nos. 1856 & 1857 of 2009 dated 02.12.2009 - CESTAT, Chennai] wherein the Tribunal had observed that the deputation of staff would come under the category of manpower supply service and not management consultancy service. Reliance was also placed on the decision in the case ....
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....es seconded by the overseas company to the group company in India (assessee therein) could not be termed as manpower recruitment or supply agency service; however, the said decision was overruled by the Hon'ble Supreme Court holding that even if salary and wages were only reimbursed and there was no markup or separate charges for secondment of employees, the activity would fall within the definition of manpower recruitment or supply agency service. 5.5 The Learned Authorized Representative for the Revenue submitted that the Commissioner has erred in holding that the respondent is not liable to pay Service Tax. 5.6.0 Further, it is also submitted by her that an amount of Rs. 9,58,94,125/- received as salary and wages including PF and Pension Contribution, EL, HPL and Gratuity in respect of employees deputed to NTPL, and the amount was received by NLC from NTPL in a staggered manner; the same is mapped to the receivable for the period. She also contended that it is evident from Annexure-I to the Show Cause Notice that the reimbursement made by NTPL to NLC was made from March 2009 to March 2012 under various entries (July 2009, November 2009, March 2010, July 2010, October 2010 ....
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....) was established. That both the respondent and TNEB have agreed to promote, jointly incorporate and invest for the establishment and operation of 1000 MW coal-based thermal power project at Tuticorin. The equity contribution of NTPL is comprised of 89% that of the respondent and 11% that of TNEB. That the respondent being the leader in the electricity generation arena, for the joint venture arrangement, the respondent was responsible for bringing in employees having the requisite functional expertise for execution of the project. 6.2 The Learned Counsel for the respondent submitted that with respect to the period from June 2008 to March 2011, the salary and wages for these employees were paid by the respondent. However, the same was reimbursed by NTPL. The transferred employees were on the payroll of the respondent. 6.3 For the subsequent period from April 2011 to March 2012, it is submitted by him that the salary for these employees were paid directly by NTPL and that the respondent did not receive any amount from NTPL; the employees were on the payrolls of NTPL. It is submitted that the amount paid as salary and wages to the employees transferred to NTPL, amounting to a su....
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....activity and sharing the revenue in the form of dividends. It is argued that if entities come together for achieving a common objective and share profits/risks together, it does not amount to rendering of service. It is submitted that the respondent has transferred the employees of NTPL only for advancing its own interest as the respondent has huge stake in the success of the venture. Moreover, that the respondent also has an obligation towards the operation and maintenance of the project; that similarly, the TNEB has the obligation to provide continued supply of water, electricity and all approvals, permits, clearances, etc. He argued that by provision of these, it could not be concluded that TNEB has engaged in effecting sale or service to NTPL. This is only of TNEB's contribution towards the joint venture, for which profits are shared in the form of dividend as rewards to risks taken. Similarly, that the respondent is providing its employees only as a mode of contribution to the project. As a fortiori, there is no service provider, service recipient and consideration to constitute a service taxable under the Act. To support the above view, reliance was placed on the following de....
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....,406/- has been disputed under the extended period of limitation under proviso to Section 78 of the Act. That none of the ingredients that are required for invoking the extended period are present in the instant case and therefore, the Show Cause Notice issued under the proviso to Section 73(1) of the Act and its consequent proceedings would be time-barred to the extent of the period from June 2008 to March 2011. Further, he argued that it is the settled position of law that conclusion that mere non-payment of duties is equivalent to collusion or wilful mis-statement or suppression of facts, is not tenable and maintainable. To support this view, the Learned Counsel for the respondent placed reliance on the very same decision in the case of M/s. Northern Operating Systems Pvt. Ltd. (supra). 6.10 He further argued that moreover, the Department had already issued a Show Cause Notice No. LTUC/365/2011-C dated 25.11.2011 for the period involving June 2007 to April 2011 demanding Service Tax under various other heads; therefore, the subsequent Show Cause Notice issued on similar facts and same period invoking the extended period of limitation on the basis of suppression of facts is no....
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....t work, which is a joint venture, which NLC, being a constituent member, is obliged to do. 9.3 We are not able to accept this argument for the reason that there is no document produced before us which establishes that it was mandatory for NLC, as per the Joint Venture Agreement, to supply the skilled personnel to NTPL. In the case of M/s. Mormugao Port Trust (supra), it is seen in paragraph 5, that there was a specific stipulation in the agreement between the members of the Joint Venture to provide the land for the purpose of the joint venture. After considering this aspect, the Tribunal in the said case had held that the demand of Service Tax under the category of 'renting of immovable property' cannot sustain. The above case is, therefore, distinguishable on facts. 10.1 Another ground on which the Adjudicating Authority has set aside the demand is that there is no consideration received by the respondent at all; the payment made by NTPL to NLC is only the salary and wages paid to the employees, which are only reimbursed on actual basis and that this could only be considered as reimbursed expenditures and costs. 10.2 However, the very same issue has been considered by the....
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.... the amounts it pays as salaries, to these seconded employees. The assessee pays for certain services received from the group companies. The assessee used to discharge service tax on payments for such services in terms of Section 66A of the Act. The appropriate major expense heads were 'Salaries & Allowances', 'Relocation expenses', 'Consultancy Charges', 'Communication Expenses' and 'Computer Maintenance and repairs.' 4. The revenue issued four show cause notices [dated 23-4-2012; (for the period October, 2006-March, 2011), 19-10-2012 (for the period April, 2011 to March, 2012), 7-5-2014 & 26-11-2015 (for the period April, 2012 to September, 2014)] alleging that the assessee failed to discharge service tax under the category of "manpower recruitment or supply agency service" with regard to certain employees who were seconded to the assessee by the foreign group companies. The first two of these notices also invoked the proviso to Section 73(1) read with Section 66A of the Act, proposing to demand service tax for the extended period. The assessee resisted these notices, refuting the allegations in the four SCNs. It was also given a hearing. By two orders [Order-in-Original....
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....e 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 secondment is a part of the global policy - of the overseas employer loaning their services, on temporary basis. On the cessation of the secondment period, they have to be repatriated in accordance with a global repatriation policy (of the overseas entity). 54. The letter of understanding between the assessee and the seconded employee nowhere states that the latter 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 package, with allowances, etc., are all expressed in foreign currency (e.g., US $ 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 Rs. 3,66,700. In addition, an annual utility allowance of Rs. 3,97,500/....
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....f the view that the respondent, namely, M/s. NLC, is liable to pay the Service Tax under the category of manpower recruitment or supply agency service. The issue on merits is answered in favour of the Revenue and against the assessee. 12.1 The Adjudicating Authority has set aside the demand on the ground of limitation also. The Learned Authorized Representative for the Revenue has stressed that even though the respondent is a public sector undertaking, it cannot be said that there was no suppression of facts with intent to evade payment of Service Tax. In the present case, apart from a vague allegation in the Show Cause Notice, there is no evidence of any positive act of suppression of facts brought out against the respondent. The Learned Counsel for the respondent has argued that an audit was conducted earlier, by which a Show Cause Noticed dated 25.11.2011 was issued, in which issues other than the present issue, were raised. The Department, at that time, had verified their entire records. The respondent had replied to the said Show Cause Notice as well. Further, vide their letter dated 24.05.2011, the respondent had furnished the details of receipt of amounts from NTPL as als....
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.... by limitation as there are no grounds to invoke the extended period of limitation. The finding of the Adjudicating Authority that the Show Cause Notice is time-barred, is upheld. However, part of the disputed period falls within the normal period. 12.5 It is also pointed out by the Learned Counsel for the respondent that though the demand is confirmed for the entire period from June 2008 to March 2012, only for the period from June 2008 to 31.03.2011 NTPL has reimbursed the salaries and wages to NLC. For the remaining period i.e., from 01.04.2011 to 31.03.2012, NTPL has directly paid the salaries/wages to the employees and the demand raised for this period is without basis. On perusal of paragraph 6 of the Show Cause Notice, it reads as under:- "6. From 01-04-2011, Salary to the NLC employees supplied to NTPL, is paid directly by NTPL as informed to LTU in NLC letters Lr. No. F & AB/Central Sec./F.No.6A/11 dt:24.05.2011 and Lr. No. F & AB/Central Sec./F.No. 6A/11 dated:30.07.2011. Although the NLC employees supplied to NTPL may be paid their salaries directly by NTPL they continue to be in the rolls of NLC and the Provident Fund, Gratuity, etc., are maintained at NLC. ....