TMI Blog2021 (1) TMI 712X X X X Extracts X X X X X X X X Extracts X X X X ..... only with the supply of manpower - Further, we find that post July 2012, the definition of service specifically incorporated seeks to exclude certain transactions from the ambit of service and provision of service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. We also note that the legal position post negative list regime does not make any departure from the settled position of law as existed before 2012 with respect to the service tax implications on deputation of employees. In fact, the above exclusion in the definition of service amplifies the position of law to keep employees providing service to the employer in the course of their employment out of the purview of service tax. The persons seconded to the appellant working in the capacity of employees and payment of salaries etc is made to such employees by group companies only for disbursement purposes and hence employee-employer relationship exist and such an activity cannot be termed as manpower recruitment or supply agency and the whole arrangement between the appellant and its group companies does not fall under the taxable service of ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest under Section 75 of the Finance Act,1994 6. Penalty i. Rs 28,37,08,191/-imposed under Section 78 of the Finance Act, 1994; ii. ₹ 10,000/- under Section 77 of the Finance Act, 1994; 7. Service Tax deposited Rs. 5,33,42,049/- Copy of the Challans dated 05.01.2013 is enclosed as Annexure-A 8. Interest Deposited ₹ 2,22,48,188 Copy of the Challans dated 05.01.2013 is enclosed as Annexure-A 2. Briefly the facts of the present case are that the appellants are engaged in providing software development and IT enabled services and are registered with Service Tax Commissionerate, Bangalore for payment of service tax under the categories of Information Technology Software Service , Business Auxiliary Service , Business Support Service and Consulting Engineer Service . Further, on gathering intelligence and subsequent examination of balance sheet of the assessee, the Department found that the assessee has incurred sizeable expenditure in foreign currency towards import of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ravel expenses and other miscellaneous expenses, directly related to the secondment of the employees. vii. It is specifically agreed that the payments made by the Appellants to Target, USA shall be limited to actual costs incurred; the parties agree that during the Secondment period, the role of Target, USA is restricted to that of payroll service provider only. viii. Target, USA shall furnish the Appellants periodic statement detailing the reimbursable expenses due to the Target, USA with respect to the employees. Each statement shall include a debit note denominated in US dollars and that shall meet all of the Appellants requirements for payments as instructed by the Appellant. ix. The seconded employees will be subject to taxation in India based on applicable taxation laws. The Appellants shall ensure that all reasonable measures are taken with respect to full compliance of the India Tax obligations of the Employees. 3. Further, as per the appellant, Target, USA have raised debit notes on the appellants towards salaries paid to the employees seconded from Target, USA and the appellants have remitted the amount in foreign currency and disclosures were made in their f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Applicant has the obligation to withhold taxes under Section 195 of the Act. b. The Applicant does not become the employer of the seconded employees and what is paid by the Applicant to the US Principal would not be reimbursement of salary but fees for technical services, depending on a finding on that question. c. The deduction of tax has to be at the rate prescribed by the Act. Payroll processing charges: a. Neither the agreements nor the application, specified what duties are to be performed by the seconded employees in India. Adequate details were also not available on the persons seconded or about the roles they have to perform in India. It was held that it would not be proper and just to render a ruling on the nature of the employees in respect of whom processing charges are collected by the US Principal. 3.2 As per the appellant, they were not satisfied with the advance authority ruling but to avoid further litigation and mounting interest in case of any liability, the appellants on their own account, calculated the service tax liability on the salaries etc. relating to the expats for the period 20072008 to 2012-2013 and paid service tax with inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anpower recruitment or supply agency service during the period 2008-2009 to 2011-2012; d) Under valuation on the value of the taxable service received is established in the instant case and the Appellants have contravened the provisions of Section 66A, Section 67 and Section 68(2) of the Finance Act, 1994 read with Rule 2(1)(d)(v) and Rule 6 of the Service Tax Rules, 1994; e) Whenever the payment of interest under section 75 of the Finance Act, 1994 is mandated by the statute they automatically come into play when the happening or non-happening of an event mentioned in the relevant section of the statute occurs. The liability gets extinguished only when the statutory payments are made as required by the statute; f) The Appellant has failed to disclose the correct value of taxable services to the department in their statutory ST-3 returns. The Appellants have failed to pay the service tax on import of services under Section 66A of the Finance Act, 1994 with an intention to evade payment of taxes on the said services. Therefore, invoking proviso to Section 73(1) of the Act is legally justified and merits confirmation. Hence the present appeal. 4. We have heard the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on for the alleged taxable service except payment of service charged @ 15 dollar per employee per pay role cycle for processing the pay role of the seconded employees. He also submitted that there is no consideration charged by Target USA on the appellant for providing the supply of manpower as alleged by the Department and confirmed by the impugned order. All the payments made by the appellant to Target USA is only a reimbursement of salaries and other benefits relatable to the seconded employees hence the value of taxable service of manpower supply is Nil. He further submitted that Target USA at the most maybe considered as pure agent in the event taxable service of supply of manpower is held to be provided. He also submitted that the appellants are not bound by the ruling of authority for advance ruling of income tax in respect of service tax. He also submitted that the computation of liability is incorrect as the appellants have made payment of service tax along with interest on their own account and subsequently took the credit and thereafter got the refund under Rule 5 of CCR and the said refund was sanctioned in toto. He also submitted that there is not suppression of facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... othing but supply of manpower service and hence the impugned order has rightly confirmed the demand. 7. After considering the submissions of both the parties and perusal of the material on record as well as perusal of the various decisions relied upon by the appellant cited supra, we think that before we answer the question involved in the present case, it is pertinent to examine and analyse the relevant definitions involved in the present case which are reproduced herein below: Section 65 definitions - (105) taxable service means any service provided or to be provided, - (k)to any person, by a manpower recruitment or supply agency in relation to the recruitment or supply of manpower, temporarily or otherwise, in any manner; Explanation. - For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, recruitment or supply of manpower includes services in relation to pre-recruitment screening, verification of the credentials and antecedents of the candidate and authenticity of documents submitted by the candidate; 7.1 Further, we note that the scope of Manpower Recruitment or Supply Agency service has been explain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recruitment or supply agency but in the present case, we are concerned only with the supply of manpower. Further, we find that post July 2012, the definition of service specifically incorporated seeks to exclude certain transactions from the ambit of service and provision of service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. We also note that the legal position post negative list regime does not make any departure from the settled position of law as existed before 2012 with respect to the service tax implications on deputation of employees. In fact, the above exclusion in the definition of service amplifies the position of law to keep employees providing service to the employer in the course of their employment out of the purview of service tax. We have also examined the agreements entered into by the appellant with a group company which are specifically for provision of certain specialized services and are not related to supply of manpower which is evident from various clauses in the Agreements and we also find that group companies are not in the business of supplying manpower. Further, we fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and contributed to statutory social security benefits such as provident fund. The assessee was also required to remit contributions, which had to be paid towards social security and other benefits that were payable to the account of the employees under the laws of the foreign jurisdiction. There was no basis whatsoever to hold that in such a transaction, a taxable service involving the recruitment or supply of manpower was provided by a manpower recruitment or supply agency. Unless the critical requirements of clause (k) of Section 65(105) are fulfilled, the element of taxability would not arise. 8. Further, the Hon ble High Court of Gujarat in the case of Commissioner of Service Tax Vs Arvind Mills Ltd, 2014(35) STR 496=2014TIOL-441-HC-AHM-ST has held that even if the actual cost incurred by appellant in terms of salary remuneration and perquisites is only reimbursed by group of companies, there remains no element of profit or finance benefit. The arrangement is that of the continuous control and the direction of the company to whom the holding company has deputed the employee, such an arrangement is out of the ambit to be called manpower supply service. This Tribunal also i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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