2026-VIL-724-CESTAT-BLR-ST
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SERVICE TAX CESTAT Cases

Service Tax - Secondment of employees by an overseas entity under Secondment of employee agreement - Appellant paid the entire salary of such seconded employees with other benefits while the foreign entity dispersed the other part of the salary - Whether the appellant is liable to pay service tax under the category of 'Manpower Recruitment or Supply Agency Service' under reverse charge mechanism for the manpower services received from their parent-company – HELD - The Supreme Court in the case of Northern Operating System Pvt. Ltd. held that in a typical secondment arrangement, where employees of an overseas entity are deputed to the host entity (Indian associate) on the latter's request to meet its specific needs, the payment made by the Indian company to the overseas employer would be treated as service by the overseas entity and taxed, even though the Indian company has operational or functional control over the seconded employees during the period of secondment - In the present case, the terms of the agreement between the appellant and its parent company clearly establish that the employees belong to the parent company and are sent on secondment to facilitate the operations of the appellant. The fact that the employees are under the control of the appellant during the secondment period does not change the nature of the relationship, as they continue to be on the payroll of the parent company under its international assignment policy - The impugned order is upheld to the extent of confirming the demand for the normal period, as no mala fide intention can be alleged against the appellant since any tax payment would be eligible for cenvat credit. The penalties imposed were set aside - The appeal is partially allowed
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GSTAT Appeal filed wrongly...
By CA Vivek Jalan

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