2026-VIL-425-CESTAT-HYD-ST
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SERVICE TAX CESTAT Cases

Service Tax - Secondment of expats, Reimbursement of salary, Absence of Secondment Agreement - Whether the payments made by the appellant to the foreign entity for reimbursement of salary of expatriate employees deployed in India are taxable under 'Manpower Recruitment or Supply Agency Service' as held by the Hon'ble Supreme Court in the case of Northern Operating System Pvt Ltd. – HELD - The facts of the present case are distinct from the case of Northern Operating System Pvt Ltd. In the present case, there was no formal secondment agreement between the appellant and the foreign entity and the employment agreements were independent of any service agreement. The expatriate employees were directly employed by the appellant to manage and operate the Indian business operations, and not to fulfill any service contract of the foreign entity – In the case of Northern Operating System Pvt Ltd., it has been specifically observed that the nature of service will be that of service of manpower supply. Whereas, in this case, the proposal itself has been made under the Management Business Consultancy Service. Therefore, this case cannot be decided based on the observation and decision of the judgment of Hon’ble Supreme Court in the case of Northern Operating System Pvt Ltd. - The nature of work performed by the expatriate employees was much beyond the scope of 'Management Consultancy Service' and was in the course of their employment with the appellant. The payments made by the appellant to the foreign entity for reimbursement of salary of the expatriate employees do not qualify as consideration for any taxable service - In the facts of the case and especially in the absence of any specific secondment agreement, the relationship is that of employer employee and therefore no service tax is leviable post 01.07.2012. For the period prior to 01.07.2012, these activities would still be in the realm of self service and could not be covered within the category of Business Support Service or Business Auxiliary Service hence not leviable to service tax – The impugned order is set aside and the appeal is allowed
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