TMI Blog2020 (9) TMI 432X X X X Extracts X X X X X X X X Extracts X X X X ..... case have not been considered in the order proposed by Member (technical) ii. Whether in view of the observations made by Member (Judicial) matter needs to be referred to larger bench or in view of para 4.17 of the order proposed by the Member (Technical) appeal needs to be dismissed. - ST/61410/2018-CU(DB), ST/60852/2019-CU(DB) - Interim Order No. 24-25 of 2020 - Dated:- 28-7-2020 - MR. ASHOK JINDAL, MEMBER (JUDICIAL) AND MR. ASHOK JINDAL, MEMBER (JUDICIAL) Shri Sujit Gosh, Advocate for the Appellant Shri Rajeev Gupta AR and Shri Tarun Kumar, Authorised Representative for the Respondent ORDER The appeal No ST/61410/2018-CU(DB) is directed against Order in Original No GST/GGM/COM/SM/26/18-19 dated 29th June 2018 of the Commissioner Good and Service Tax, Gurgaon. By the impugned order, Commissioner held as follows: i. I confirm the demand of ₹ 2,17,99,762 (Rupees Two crore Seventeen Lakh Ninety Nine Thousand Seven Hundred and Sixty Two Only) and order the same to be recovered from the noticee under sub-section (1A) of Section 73 of the existing Finance Act, 1994 as amended, read with Rule 6 of existing Service Tax Rules, 1994 ii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(1) (d)(i)(G) of Service Tax Rules, 1994 read with Notification No 30/2012 dated 20.06.2012. They provided sample copies of employment contract and international assignment letter of Mr Katsuyuki Nagai, Mr Akiyoshi Momoi and Mr Toshihiko Kuwahara (all expat) and the copies of cost reimbursement agreements between them and M/s Canon Inc Japan (Foreign Company) in respect of these expats. Revenue was of the view that as per these agreements the said expats continued to be the employee of Foreign Company and remained on their payrolls. The Foreign Company was paying and disbursing the salaries to these expats and thereafter the appellant used to reimburse such salary costs to Foreign Company. Thus these expats were rendering services to the appellants and the reimbursement made to Foreign Company was in nature of Fees for Technical Services. As per the agreement, it appeared that the expats were transferred temporarily by the Foreign Company to appellants. The Foreign Company retains the lien and control over the expats. On completion of the tenure the expats are repatriated and return back to the Foreign Company. Appellant was not paying service tax on the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectly between the appellant and expat, is paid by the parent company to them, for and on behalf of the appellants. The payment so made by the parent company is reimbursed to them by the appellant on an actual basis without any markup or profit element. Appellants were deducting TDS on the Indian Component of the remuneration paid by them to the expats. As per the impugned order the parent company has provided manpower supply services to the appellant and the amounts paid by the appellant to the parent company are consideration for the provision of these services. As per the provisions of Finance Act, 1994 providing for payment of service tax on reverse charge basis by the recipient of service, in such circumstance, appellants were required to discharge service tax in respect of the services so received. Hence these demands. The issue involved in the matter is no longer res integra and they rely upon the decisions of tribunal as detailed below in their support: Samsung India Electronics [2015-TIOL-393-CESTAT-DEL] Air Bus Group [2016 (45) STR 120 (T-Del)] Volkswagen India Private Limited [2014 (34) STR 135 (T)] Nissin Brake India [2019 (24) GS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign company to the expats; Another identical letter with same terms and conditions was also issued by appellants to the expats On perusal of the documents submitted in the form of affidavit during the hearing on 21.01.2020 before the Hon ble Bench, it is observed that expats continue as the employee of foreign company even during the period he is transferred to appellants. Thus, it clearly emerges that the services are not provided by such expats to the appellants but the services are provided by the foreign company through its employees (expats). These services are covered by the definition of services as per 65B(44) of Finance Act, 1994 and same is neither covered under negative list nor are exempted from payment of Service Tax. Another contention raised by the appellants is that the expats are their employees and payments are made to them as salary and TDS is deducted by them under salary head. This contention of the appellants does not make the person as their employee but he remains the employee of the foreign company. Such payments in foreign currency are regulated by Foreign Exchange Management (Foreign Currency Accounts by a Person Resident in India) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontroversies in this regard. The argument of the appellants that no Service Tax is payable by them as the value of services becomes Nil as the foreign company has received only that amount which they have paid to the expats and have not charged any markup or profit. Only the expenses have been reimbursed. But as per Section 67 of the Finance Act, 1994, gross value of the amount paid is taxable and no deduction on account of expenses is permissible. As per the item No 4 of the cost reimbursement agreement, it is evident that the appellant transfers the money to the foreign company which in turn pays to the expats. The amount paid by the foreign company to the expats (its employees) is nothing but a expense on their part and cannot be deducted for the purpose of calculation of the Service Tax. The gross amount received for rendering the services to the appellants is the total consideration received for such services and which is liable to Service Tax without any deductions of expenditures on any account. The judgments relied upon by the ld advocate of the appellants relates to the period prior to 30.06.2012 i.e. the period when services were categorised and it was held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m taking a different view. Plainly there can be no estoppel against the law. The claim raised before us is a claim based on the legal effect of a provision of law and, therefore, this contention must be rejected. Following this decision in case of Palsmac Manufacturing [1991 (51) ELT 361 (SC)+, Hon ble Supreme Court has laid down the law as follows: 6. The appellants contention that the department having earlier approved the classification of Tie Bar Nuts under Tariff Item 68 has no justification for its revision is, to our mind, not tenable inasmuch as there could be no estoppel against a statute. If according to law Tie Bar Nuts fall within Tariff Item 52 the fact that the department earlier approved their classification under Tariff Item 68 will not estop it from revising that classification to one under Tariff Item 52. See M/s. Elson Machines Pvt. Ltd. v. Collector of Central Excise 1988 (38) E.L.T. 571 (SC) = 1989 Suppl. (1) SCC 671, Para 10 at 675. In case of Pefco Foundary Chemicals Ltd [1993 SCC (Suppl 1) 74] again Supreme Court held as follows: Once the tribunal found that cylinder liner ceased to be cast iron it is obvious that the departmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Criminal Appeal No. 35 of 1967 (accused Nos. 1 and 2 in the case) under Section 120B, I.P.C. read with Clauses (37), (75), (76) and (81) of Section 167 of the Sea Customs Act, 1878 (Act VIII of 1878) as well as under Section 5 of the Imports and Exports (Control) Act, 1947. Before the commencement of the enquiry in that complaint, the Ist accused filed on August 3, 1965, the application mentioned above. 5. Now we shall proceed to examine the contentions set out earlier. 6. Reliance on Article 20(2) is placed under the following circumstances. In the enquiry held by the Collector of Customs, he gave the benefit of doubt to accused Nos. 1 and 2. This is what he stated therein : As regards M/s. Larmel Enterprises (of which accused No. 1 is the proprietor and accused No. 2 is the Manager) although it is apparent that they have directly assisted the importers in their illegal activities and are morally guilty. Since there is no conclusive evidence against them to hold them as persons concerned in the act of unauthorized importation, they escape on a benefit of doubt. 7. . 8. We shall not take up the contention that the finding of the Collector ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... present case we are not in position to agree with this submission of the Appellant. Issue Not Res-integra 4.7 Appellants defence in the case is that the expats the present case were their employees and have argued the same on the basis of submissions stating that- they entered into an agreement with these expats directly and during the course of their employment these expats worked under their control; they deducted and deposited TDS on the remuneration paid by them to expats; The parent company had issued international assignment letter to these expats, as per which they were permitted to undertake employment with the appellants; Indian component of remuneration/ salary was paid directly by the appellants to expats after deducting, TDS and the foreign component was routed through the parent company, in terms of cost reimbursement agreement with the parent company. the parent company was not engaged in providing manpower supply services. 4.8 The issue in similar circumstances and facts have been decided holding that the services do not qualify as Manpower Supply Services as defined by Section 65 (105)(k) of the Finance Act, 1994 and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsfer, delivery or supply of any goods which is deemed to be sale within the meaning of clause (29A) of article 366 of the Constitution; or (iii) a transaction in money or actionable claim; (b) a provision of service by an employee to the employer in the course of or in relation to his employment; (c) fees taken in any Court or tribunal established under any law for the time being in force. Explanation 1. For the removal of doubts, it is hereby declared that nothing contained in this clause shall apply to,- (A) ...; or (B) ..; or (C) ... Explanation 2.- .. Explanation 3.- For the purposes of this Chapter,- (a) .; (b) .. Explanation 4.- .; (51) taxable service means any service on which service tax is leviable under section 66B; Section 66B inserted in Finance Act, 1994 by Finance Act, 2012 read as follows: 66B. There shall be levied a tax (hereinafter referred to as the service tax) at the rate of twelve per cent on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lectrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service; It is in three parts. The main part is followed by an inclusive clause and ends by an exclusionary clause. The main clause itself is very wide. It applies to any service made available to potential users. The words 'any' and 'potential' are significant. Both are of wide amplitude. The word 'any' dictionarily means 'one or some or all'. In Black's Law Dictionary it is explained thus, word ,any' has a diversity of meaning and may be employed to indicate 'all' or ,every' as well as 'some' or 'one' and its meaning in a given statute depends upon the context and the subject- matter of the statute . The use of the word any' in the context it has been used in clause (o) indicates that it has been used in a wider sense extending from one to all. The other word 'potential' is again very wide. In Oxford Dictionary it is defined as 'capable of coming i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omprise an activity for consideration. There can be many activities without consideration. An artist performing on a street does an activity without consideration even though passersby may drop some coins in his bowl kept after feeling either rejoiced or merely out of compassion. They are, however, under no obligation to pay any amount for listening to him nor have they engaged him for his services. On the other hand if the same person is called to perform on payment of an amount of money then the performance becomes an activity for a consideration. Provisions of free tourism information, access to free channels on TV and a large number of governmental activities for citizens are some of the examples of activities without consideration. Similarly there could be cases of payments without an activity though they cannot be put in words as being consideration without an activity . Consideration itself pre-supposes a certain level of reciprocity. Thus grant of pocket money, a gift or reward (which has not been given in terms of reciprocity), amount paid as alimony for divorce would be examples in this category. However a reward given for an activity performed expli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... continue to work for the foreign company after his termination of contract with the appellant which shows that effective controls remain with the foreign company. B. Terms of Agreement contained in the cost reimbursement agreements (RUD with SCN) between foreign company and appellants provides as following :- a. The expats are employees of the foreign company (Item 1) b. They are transferred to India (Item 2), c. They come to India for a specific period of three years as fixed by the foreign company (Item 2), d. They are deputed for a specific task against the post fixed by the foreign company and will work in the capacity of Assistant Director- Consumer System Products Division/ Manger Market Engineering Group etc. (Item 2). C. In the Affidavit filed during hearing on 21.01.2020, it is observed that Annexure-1 attached with International Assignment Letter issued by the foreign company to Sh Kota Kuramochi is different from the Annexure 1 attached with Employment contract issued by the appellants (Both annexures dated 30/10/2014) in as much as that the foreign company has allowed additional benefit of Return ticket of Economy class to Japan o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs [(2018) 9 SCC 1] after examining various judgments held 52 To sum up, we answer the reference holding as under (i) Exemption notification should be interpreted strictly; the burden of providing applicability would be on the assessee to show that his case comes within parameters of the exemption clause or exemption notification. (ii) When there is ambiguity in exemption notification which is subject to strict interpretation, the benefit of such ambiguity cannot be claimed by the subject/assessee and it must be interpreted in favour of the revenue. (iii) The ratio in Sun Export case (supra) is not correct and all the decisions which took a similar view as in Sun Export case (supra) stands over-ruled. Again in case of VVF and Others [Order dated 22.04.2020 in Civil Appeal Nos. 2256-2263 of 2020 (Arising out of S.L.P.(C) Nos. 28194-28201/2010)+, a three member bench of Hon ble Supreme Court held as follows: 13.5. In the case of R. K. Garg v. Union of India (1981) 4 SCC 675, this Court observed and held as follows: 8. xxx xxx xxx The Court must always remember that legislation is directed to practical problems, that the eco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case of ambiguity in charging provisions, the benefit necessarily goes in favour of the assessee, but for an exemption notification or exemption clause the benefit of ambiguity must be strictly interpreted in favour of the Revenue/State. It is further observed and held that a person claiming exemption, therefore, has to establish that his case squarely falls within the exemption notification, and while doing so, a notification should be construed against the assessee in case of ambiguity. A person who claims exemption has to establish his case. Does Deduction of TDS by the Appellant from remuneration paid establishes the employer-employee relationship: 4.16 In case of GVK Industries *2017 (49) STR 513 (SC)+ Hon ble Supreme Court has held as follows: 37. As the factual matrix in the case at hand, would exposit the NRC had acted as a consultant. It had the skill, acumen and knowledge in the specialized field i.e. preparation of a scheme for required finances and to tie-up required loans. The nature of activities undertaken by the NRC has earlier been referred to by us. The nature of service referred by the NRC, can be said with certainty would come within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the ambit of taxability. In the facts of that case Bench had concluded that there existed an employer, employee relationship between the expats and the Indian Company hence had given the benefit of exclusion clause to Section 65 B (44), which is not the case in appeals before us. 4.18 In view of our discussions as above we are not in position to agree with the submissions made by the appellants on the merits of the issue. Before concluding discussion on the issue of liability to service tax we would put on record, that Commissioner has in both the impugned order considered the definition of Service as it existed at the relevant time as per Section 65 B (44) ibid, and has decided the issue accordingly and not on the basis of Section 65 (105) (k) defining Manpower Supply Services. All the arguments made by Appellants relying on various decisions in respect of Manpower Supply Services have been rejected by us earlier. 4.19 Since the Show Cause Notice and demand notice have been issued within the normal period of limitation as per Section 73 of Finance Act, 1994, appellants have also not argued limitation before us. Hence we uphold the demand of service tax made as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the 41 ST/85354,85355/2015 penalty for a crime or a fine or forfeiture provided as punishment for the violation of criminal or penal laws. Since there is no dispute about such infractions as recorded by the Commissioner in his impugned order, penalties as imposed under Section 77(2) are justified. 4.22 Commissioner has in impugned order also imposed penalties under Section 76 of the Finance Act, 1994. Hon'ble Kerala High Court has in case of Krishna Poduval [2006 (1) STR 185 (Ker)] held as follows: 11. The penalty imposable under S. 76 is for failure to pay service tax by the person liable to pay the same in accordance with the provisions of S. 68 and the Rules made thereunder, whereas S. 78 relates to penalty for suppression of the value of taxable service. Of course these two offences may arise in the course of the same transaction, or from the same act of the person concerned. But we are of opinion that the incidents of imposition of penalty are distinct and separate and even if the offences are committed in the course of same transaction or arises out of the same act, the penalty is imposable for ingredients of both the offences. There can be a situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts of this case from the facts in the case M/s. Mikuni India Pvt.Ltd. and India Yamaha Motor Private Limited (supra) has held that the decision is not applicable to the present case. In fact, as Hon ble Member (Technical) have not discussed the facts in the case in hand from the facts of M/s. Mikuni India Pvt.Ltd. and India Yamaha Motor Private Limited (supra), therefore, in my considered view as held by the Hon ble Bombay High Court in the case of Mercedes Benz India Pvt.Ltd.-2010 (252) ELT 168 (Bom), contrary decision cannot be taken by the Tribunal and best course is to refer the matter to the larger bench in the interest of justice delivery system. 9. In the above said case, it has been observed as under:- 19 . Having said so, the impugned view taken by the Tribunal by no means can be said to be correct approach. Needless to mention that if the Tribunal wanted to differ to the earlier view taken by the Tribunal in the identical set of facts, the judicial discipline required reference to the larger bench. One co-ordinate bench finding fault with another coordinate bench is not a healthy way of dealing with the matters. In this view of the matter, we have no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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