TMI Blog2021 (10) TMI 1171X X X X Extracts X X X X X X X X Extracts X X X X ..... irely revenue-neutral. The appellant has paid service tax along with interest - Taking into consideration all these aspects, it is opined that the penalties cannot sustain and the same require to be set aside - penalties set aside. Demand of service tax - Manpower Recruitment or Supply Agency Service - HELD THAT:- The parent company has deputed its employees to work in the appellant s factory for doing after-sales work and other related works. It is seen in para 2.3 of the agreement that the payment made by the appellant to the parent company is nothing but part of the salary. We do not find any payment of consideration towards rendering of Manpower Recruitment or Supply Agency Service. The appellant company and the parent company being of same group, the secondment employees cannot be said to have been recruited by the parent company to the appellant company. Once the employees are deputed to the appellant, the appellant would enter into individual contract for employment with such employees. A part of the salary that is to be paid to these employees is paid to the parent company in foreign currency for payment to their families. The said amount is not a consideration for ser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Service and Maintenance and Repair Services. After due process of law, the original authority confirmed the demand, interest and imposed penalties. Aggrieved, the appellants are now before the Tribunal. 2. Learned Counsel Shri G. Natarajan appeared and argued for the appellants. The details of services, period involved and the demands are given as shown in the table below : S.No. Category of Service Period of demand Service Tax demanded (along with Education Cess/ SHE Cess Remarks 1. Manpower recruitment and supply service 2006-07 to 2008-09 ₹ 4,48,94,664 ₹ 2,21,06,755 paid 2. Online Information and Database Access and Retrieval Service 2006-07 to 2008-09 ₹ 13,96,287 ₹ 13,96,287 paid 3. Consulting Engineering Service 2006-07 to 2008-09 ₹ 18,41,572 ₹ 18,43,52 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over to the families of the employees. The department has alleged that such payment made by the appellant to the parent companies would come within the purview of Manpower Recruitment or Supply Agency Service as defined under Section 65 (105) (k) read with Section 65 (68) of the Finance Act, 1994. 5. It is submitted by him that the very same issue was considered by the Tribunal in the appellant s own case for the subsequent period and demands have been set aside by the Tribunal vide Final Order No.41735/2019 dated 24.09.2019. The Tribunal in the said case relied upon the decision in the case of Nissin Brake India Pvt. Ltd. Vs CCE Jaipur 2019 (24) G.S.T.L. 563 (Tri.-Del.) and Ivanhoe Cambridge Investment Advisory India (P) Ltd. Vs CST Delhi 2019 (21) G.S.T.L 553 (Tri.-Del.) and other decisions. He prayed that the demand may be set aside. 6. With regard to demand of service tax under Management, Maintenance and Repair Service, Learned counsel sought our attention to page No.126 of the appeal book which contains a Memorandum entered between the appellant-company and the foreign company. He pointed out that the said agreement is only with respect to marketing, sales promot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fall under Business Auxiliary Service , these services have to be treated as Export of Services . The matter was remanded for verification and to consider eligibility of rebate. 7. It is submitted by the counsel that the Tribunal in the case of CST Vs Life Care Medical Systems 2016-TIOL-1007-CESTAT-MUM had analysed similar issue. The Tribunal in this decision relied on the Bombay High Court judgment in CGS Vs SGS India Pvt. Ltd. - 2014 (34) STR 554 (Bom.) and the majority decision in the case of Microsoft Corporation (I) (P) Ltd. - 2014 (36) STR 766 (Tri.-Del.). In this regard, decision of Tribunal in Samsung India Electronics Pvt. Ltd. Vs CCE 2016 (42) STR 831 (Tri.-Del.) was also relied on by Counsel. He prayed that demand may be set aside. 8. Learned Authorized Representative Ms. K. Komathi appeared for the department. She supported the findings in the impugned order. 9. Heard both sides. 10. The appellant is not contesting the demand on Online Information Database Access and Retrieval service as well as Consulting Engineer services. He is contesting only penalties imposed under Section 78 of the Finance Act, 1994 in this regard. We have to agree with the argum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dment Contract. The said salary shall consist of a portion to be paid at the seconded area / country ( Local Salary ) and a portion to be paid in the country of origin of the Seconded Service Engineer ( Home Country Salary ) In addition, KIPL shall bear and reimburse KAP for all expenses incurred in relation to the preparation work and appointment of the Seconded Service Engineers. In case that KIPL desires to retain the Seconded Service Engineer after finishing his assignment, KAP shall continue remain the employment of the Seconded Service Engineer on Standby basis for next assignment and KIPL bear the full costs for the employment. The detailed terms and conditions of this Standby employment shall be defined separately. It is seen that the agreement is for secondment of service engineers from the foreign companies to the appellant company. In Article 1, it is stated that the foreign company in consideration of the payment of salaries, fees and other cost listed in Article 2.3 despatches its service engineers to KIPL on a secondment basis, to render after-sale services for Komatsu brand construction equipment . 13. From the terms of the agreement, it is clear th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (I) Pvt. Ltd. Vs CST New Delhi - 2017 (52) STR 489 (Tri.-Del), it was held as under : Service Tax of ₹ 2,52,20,279/- stands confirmed by the impugned order in respect o remittances by the appellant to overseas entities whose employees were seconded for service with the appellant. The remittances were prior to 18-4-2006. Revenue alleged and confirmed this allegation in the impugned order that Manpower Supply and Recruitment was provided by overseas entities to the appellant and sine the overseas entities did not have permanent establishment in India, the inherence of tax liability fell on the appellant. This reversal of the normal inherence of tax mandated by the provisions of the Act was introduced by the legislative dynamics of Section 66A introduced by the Finance Act, 2006, w.e.f. 18-4-2006. Prior to 18-4-2006, a recipient of Manpower Supply and Recruitment service was not liable to remit tax in the law stands concluded by the decision of the Supreme Court in Indian National Shipowners Association v. UOI 2009 (13) S.T.R. 235 (Bom.)=2010 (17) S.T.R. J57 (SC). Secondment of employees from abroad for serving in India does not constitute rendering of Manpower Supply or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appearing for the Revenue reiterates the findings of the adjudicating authority. It is his contention that the Indian entity should have paid full salary directly to the employee of the appellant company other than routing a part through the foreign/holding company. It is also the contention of the Revenue that after a period of 3-4 years such global employees go back to the foreign/holding company and even during the intervening period, during the employment in the appellant company, the social security liability has been discharged in their home country. Accordingly, he submits that the transaction is one of supply of labour/manpower by the foreign company to the appellant-Indian company. Accordingly, he pleads for upholding the Order-in-Original. 5 . We have carefully considered the submissions made by both sides and also perused the entire company agreements (Annexure-B) as well as the clauses of agreement with the global employee (Annexure-A). 5.1 In view of the clauses of agreements noticed herein above and other facts, we hold that the global employees working under the appellant are working as their employees and having employee-employer relationship. It is further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PPENDIX KIPL undertakes to perform following services, in India in the interest of KAP 1) Sales and Marketing a) Coordinating in distributor and customers network b) Marketing research c) Joint advertising and marketing activities d) Planning of sales product strategies (mainly co-ordination) e) Advising prising strategies (together with KAP) f) Joint participation in launching and marketing of new products g) Providing marketing information and intermediary service of potential customers h) Conduct regular or ad-hoc technical and marketing meeting with customers. 2) Product Support a) Provision of technical support services relating to application engineering, product support and after sales service b) Procurement planning and strategy c) Improvement of product quality d) Product training and support In connection with promotion of sales, marketing survey and providing such activities, the appellants is also undertaking after sales service which is in the nature of product support. The department has classified the activity under Management, Maintenance and Repair Service . There is a major element of promotion of sales and marke ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the issue is no more res integra as the service is rendered by the appellant on the goods which was manufactured by overseas manufacturer. It would mean the services rendered by the appellant is to an overseas manufacturer on whom Service Tax liability does not arise. The service rendered to such a person situated based at overseas and no Service Tax liability arises on him but under reverse charge mechanism appellant is made liable to pay, however, in this services are consumed y a person not in India, no Service Tax liabilities arises on appellant is the law settled which is supported by judgement of Hon ble Bombay High Court in the case of SGS India Pvt. Ltd.(supra), we reproduced the relevant paragraphs :- 21 . The definition of the term taxable service is inclusive. It also includes technical testing and analysis [see Section 65(106)(zzh)]. By Section 65(106), technical testing and analysis has also been defined. In such circumstances, when technical inspection and certification is also a service and goods in question have been inspected or tested, but the services were of the nature noted by us above, the payment was also made in terms aforesaid, then, the benefit of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 625 that Service Tax is a tax on each activity. When it comes to a Service Tax on professions, the services rendered are of advise and hence, the Hon ble Supreme Court with regard to the nature of the tax concluded that it is rendered by a Chartered Accountant, for example when he advises his client or audits his account. Similarly, a cost accountant charges his client for advise as well as doing his work of costing. For each transaction or contract, Chartered Accountant/Cost Accountant renders professional based services. However, Mr. Sridharan submits if the taxable event is the provision of services, then, the place where the services have been rendered is of significance. The services will be taxable only if they are provided within India. Mr. Sridharan submits that Service Tax is a destination based consumption tax and therefore, it is not applicable on export of services. 24 . In the present case, the Tribunal has found that the assessee like the respondent rendered services, but they were consumed abroad. The clients of the respondents used the services of the respondent in inspection/test analysis of the goods which the clients located abroad intended to import from I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... services are classifiable under Business Auxiliary Service and not under Management, Maintenance and Repair Service. In such circumstances, when the appellant has rendered services (BAS) to the foreign company, such service would qualify as Export of Service in terms of Rule 3 (1) (ii) of the Export of Service Rules, 2005 as the service recipient is situated outside India. When the services are exported, they are not taxable in India and for this reason the demand under this category cannot sustain. The department has classified the said service as Management, Maintenance and Repair Service and construed that as the place of performance of this service is in India, these services cannot be treated as Export of Service . We have already made clear that since the essential character of the agreement is marketing and sales promotion, the activity has to be classified under Business Auxiliary Service . In the case of BAS, as the recipient is situated outside India, such services are to be treated as Export of Service . 21. From the foregoing we hold that demand under Management, Maintenance and Repair Service cannot sustain and requires to be set aside, which we hereby do. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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