TMI Blog2020 (12) TMI 1018X X X X Extracts X X X X X X X X Extracts X X X X ..... h the supply of manpower. Further, it is found that after the 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. Also, 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. The persons seconded to the appellant working in the capacity of employees and payment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /CROSS/20255/2018 - FINAL ORDER NO. 20852-20854/2020 - Dated:- 23-12-2020 - MR. S.S GARG, JUDICIAL MEMBER AND MR. P. ANJANI KUMAR, TECHNICAL MEMBER Shri Ravi Raghavan, Advocate for the Appellant Shri P.Gopakumar, Authorized Representative for the Respondent ORDER The appellant has filed two appeals against the impugned orders dated 03.03.2014 and 04.03.2014 passed by the Commissioner of Service Tax whereby the demand of service tax along with interest and penalty has been confirmed against the appellant while the third Appeal No. ST/21502/2017 has been filed by the Department against the impugned order dated 27.02.2017/16.06.2017 passed by the Commissioner wherein the learned Commissioner has dropped the proceedings of the SCN initiated by the Department for the subsequent period. Since the issue involved in all the three appeals is identical, hence all the three appeals are taken up together for discussion and disposal. First, we take up the assessee s appeals. The details of the three appeals are given herein below in tabular form: SL. NO . PARTICULARS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the case are that the appellants were registered with the Department for discharging the service tax under the categories of Manpower Recruitment Agency Service , Business Auxiliary Service , Commercial Training and Coaching Service , TTSS , Telecommunication and Legal Consultancy Service etc. Consequent upon the audit of the records conducted by the officers of the Department, proceedings were initiated against the appellant for non-payment of service tax in respect of agreements entered into by the appellant with its group companies located in the USA, UK, Dublin (Ireland), Singapore etc. and provide general back office and operational support to such group companies. The relevant terms of the agreement to understand the activity are as follows: a) When required Appellants requests the group companies for managerial and technical personnel to assist in its business and accordingly the employees are selected by the group company and they would be transferred to Appellants. b) The employees shall act in accordance with the instructions and directions of Appellants. The employees would devote their entire time and work to the employer seconded to. c) T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29/201314 dated 03.03.2014 and No. 30/2013-14 dated 04.03.2014 wherein he has disregarded most of the submissions made by the appellant and confirmed the proposals in the notice except the demand for the period from April 2006 to September 2006 and accepting the fact that part of the demand has been raised @ 12.3% instead of 10.30%. The confirmation of the demand by the learned Commissioner is based on the following grounds: i. The activity of providing skilled manpower, on secondment basis, which works under the supervision and control of the Appellant for a fixed period of time on temporary basis, to the Appellant, falls in the domain of the manpower recruitment or supply agency service within the meaning of Section 65(68) read with Section 65(105) (k) of the Finance Act, 1994; ii. The group companies and their various branches/subsidiaries abroad, as the case may be, would be the service provider and the Appellant, who receives the skilled manpower, on secondment basis, would be the service recipient. iii. There are no exclusion clauses in the definition of manpower recruitment or supply agency, under Section 65(68) of the Finance Act, 1994, that the service provider s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny reasonable cause for their failure to pay the Service Tax due and to make a case for waiver of penalty under Section 80 of the Finance Act, 1994. Aggrieved by the impugned order, the appellant files these two appeals and as far as the third appeal No. ST/21502/2017 filed by the Department, the period involved was from April 2012 to September 2014. 4. As a sequel to the previous Show Cause Notices, the Assessee was issued two Show Cause Notices bearing C No. IV/16/153/2014- ST. Adjn. (SCH No. CAU/153/Div. III/Gr 29 dated 07.05.2014 and C. No. IV/16/293/2015 ST II Adjn. /2043/15 dated 26.11.2015 demanding service tax of ₹ 4,36,75,590/- and ₹ 7,55,48,448/- for the period April 2012 to 2013 and 2013 to September 2014 respectively along with interest and penalty. 5. The assesses filed detailed replies on 02.07.2014 and 31.12.2015, mainly harping that Service tax cannot be demanded as the services received from the foreign affiliates do not fall under Manpower Recruitment or Supply Agency Services for the period prior to Negative List. Further, for the period post Negative list, the definition of the term Service as per Finance Act, specifically excludes the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eimbursement based on actuals and there is no amount which is payable in respect of the activity in question and therefore there is no consideration involved; x. That in any case, the very definition of service under Section 65B(44) of the Finance Act, 1994 specifically excludes provision of service by an employee to the employer in the course or in relation to his employment and therefore the demand is not sustainable. 8. Being aggrieved by the order of the Commissioner dropping the demand, the Revenue has filed an appeal challenging the said Order-in-Original in which the assessee has also filed cross objection. 9. We have heard the learned Counsels for both the parties and perused the material on record and the decisions relied upon by the appellant. 10. Learned Counsel for the appellants submitted that the impugned order passed in assessee s appeal is not sustainable in law as the same has been passed without properly appreciating the facts and the law. He further submitted that the Department having passed a well-reasoned order (Orderin-Original No. 54-55/2016-17 dated 27.02.2017/16.06.2017) on merits cannot change the stand for a demand on the very same a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en considered by various Benches of the Tribunal and has held in favour of the assessee. He relied upon the following cases: Honeywell Technology Solutions Lab Pvt. Ltd. Vs CST, Bangalore, 2020-TIOL-1277-CESTAT-BANG. M/s Volkaswagen India Pvt. Ltd. Vs CCE, Pune-I, 2014 (34) STR 135 (Tri. Mumbai) maintained in 2016 (42) STR J145 (SC). CST Vs Arvind Mills Ltd, 2014-TIOL-441-HC-AHM-ST. CCE Vs M/s Computer Science Corporation India Pvt. Ltd, 2015 (37) STR 62 (All.) Spirax Marshall P. Ltd. Vs CCE, Pune-I, 2016 (44) STR 310 (Tri. Mum) maintained in 2016 (44) STR J153 (SC). Nissin Brake India Pvt. Ltd. Vs CCE, Jaipur-I, 2019 (24) GSTL 563 (Tri. Del.) maintained in 2019 (24) GSTL J171 (SC). M/s Mikuni India Pvt. Ltd. Vs Commissioner of CGST, Rajasthan, 2019-TIOL-3188-CESTAT-DEL. M/s India Yamaha Motor Pvt. Ltd. Vs CCE, New Delhi, 2019TIOL-3675-CESTAT-DEL. 10.1 He further submitted that in the present case there is no consideration charged by the foreign companies on the appellant for providing the supply of manpower as alleged by the Department and confirmed in the impugned order. He also submitted that the consideration under Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... received by the appellant with respect to Information Technology Software Services for the month of August, 2008. The service tax implication on the same worked out to be ₹ 17,45,698/- which was deducted from the final amount of service tax remitted by the appellant under reverse charge mechanism for the year 2008-9. He also submitted that the entire amount totaling to ₹ 47,17,537/- (service tax and interest) has been paid vide GAR-7 challans and has also furnished the said challans but the same has not been appropriated. Nevertheless, the learned Commissioner has at Para 6.3(g) of the impugned order held that the appellants are entitled for the adjustment of service tax of ₹ 31,39,745/- against the short payment of ₹ 41,11,742/-. Learned Counsel also submitted that when the appellants are not liable to pay service tax, the question of payment of interest does not arise. 11. On the other hand, learned AR reiterated the findings of the impugned order in assessee s appeals and in the Department s appeal, learned AR submitted that the activity of providing skilled manpower on secondment basis, which works under the supervision and control of the appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: 22.3 In these cases, the individuals are generally contractually employed by the manpower supplier. The supplier agrees for use of the services of an individual employed by him to another person for a consideration. The terms of the individual s employment may be laid down in a formal contract or letter of appointment or on a less formal basis. What is relevant is that the staff are not contractually employed by the recipient but come under his direction. 12.2 Further, for the period post July 2012, the nomenclature bases classification of service tax was done away with and service was specifically defined under Section 65B (44) of the Finance Act, 1994. Clause 44 of Section 65B read as: (44) service means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include- (a) an activity which constitutes merely,- (i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conded 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 manpower recruitment or supply agency service as defined under the Finance Act, 1994. We also find that there is no service provider-recipient relationship in the present case, as required by Section 65(105)(k). This issue is no more res integra and has been settled by various decisions of the Tribunals and the High Courts and upheld by the Hon ble Apex Court. We may refer to few of the decisions in the case of Honeywell Technology Solutions Pvt. Ltd. Vs CST, Bangalore, 2020-TIOL-1277-CESTAT-BANG wherein recently this Tribunal based on same set of facts set aside the demand in as much as there was a distinct employee-employer relationship between the seconded employee and the assessee. We also hold that method of disbursement of salary cannot determine the nature of the transac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as decided by Final Order No. 70436/2019 dated11.10.2019 by relying upon the case of Volkswagen India Pvt. Ltd. Vs. CCE, Pune-I -2014 (34) STR 135(Tri.-Mumbai) and the above discussed case law has held that the expatriates working under the appellant are the employees of the appellant as there is an employer-employee relationship. As such, there is no supply of manpower service which is rendered to the appellant by the foreign/holding company. As far as short payment of service tax of ₹ 41,11,742 and the interest of ₹ 16,82,810 is concerned, the learned Counsel has submitted that the entire amount totaling ₹ 47,17,537/- (service tax and interest) has been paid vide GAR Challan and the challans have also been annexed but the learned Commissioner has not considered the same and appropriated the same also. For this discrepancy, we remand the matter to the learned Commissioner to examine the payment of service tax paid by the appellant through various challans and thereafter determine the demand of service tax and interest due from the appellant, if any. 13. In view of our discussion above, by following the ratios of the various decisions cited supra, we allow t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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