2026-VIL-1551-CESTAT-MUM-ST
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SERVICE TAX CESTAT Cases

Service Tax - Secondment of employees between group companies, Taxability of manpower recruitment and supply services under Finance Act 1994, Invocation of extended period of limitation - Foreign group company paid salaries and statutory employment benefits to personnel outside India and recovered amounts from respondent assessee without markup by raising debit notes. All employment related costs and risks were borne by respondent. Department interpreted arrangement as import of manpower recruitment or supply agency services - First Appellate Authority set aside order and dropped confirmed demands and penalties. Revenue preferred appeal contending issue was settled by Supreme Court in Northern Operating System Private Limited case - Whether secondment arrangement between group companies involving deputation of overseas employees to Indian associate constitutes taxable manpower supply service attracting service tax under Reverse Charge and whether extended period of limitation can be invoked - HELD - Secondment arrangement between group companies involving deputation of employees from overseas entity to Indian associate where overseas entity retains employer status and control over employee terms while Indian company exercises functional control over work performance constitutes provision of manpower recruitment and supply service taxable under reverse charge mechanism - Supreme Court in Northern Operating System case held that assessee was service recipient for service of manpower recruitment and supply services. However invocation of extended period of limitation in cases involving such secondment arrangements is not justified when view held by assessee about liability was neither untenable nor mala fide and when department itself has discharged later SCNs issued for subsequent periods. Mere non-payment of service tax without more is not equivalent to collusion or wilful misstatement or suppression of facts required to invoke extended period - Presence of essential ingredients of fraud collusion wilful mis-statement or suppression of facts or contravention with intent to evade tax cannot be found where assessee has acted on bonafide belief supported by judicial interpretations existing at relevant time. Demand relating to extended period cannot be sustained but demand for normal period of limitation can be recovered - The appeal filed by Revenue is dismissed. Demand of service tax and imposition of penalty are set aside in respect of extended period. Matter is remanded for quantification of demand for normal period of limitation only – Ordered accordingly
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