2026-VIL-1834-CESTAT-CHE-ST
  1. Home
  2. 2026-VIL-1834-CESTAT-CHE-ST

SERVICE TAX CESTAT Cases

Service Tax - Taxability of secondment of expatriate personnel by foreign group companies to Indian entity as Manpower Recruitment or Supply Agency Service - Appellant received personnel deputed by foreign group companies under an International Mobility Agreement and made payments towards their remuneration without discharging service tax - Department held the activity taxable as Manpower Supply Agency Service up to June 2012 and as a declared service under Section 65B(44) from July 2012, with liability on Appellant under reverse charge - Appellant contended that a genuine employer-employee relationship existed as salary was paid through its payroll, TDS was deducted and the personnel worked under its exclusive control, and that the Hon'ble Supreme Court decision was distinguishable as no mark-up was charged, relying on a High Court decision under the GST regime - Whether the secondment constituted supply of manpower by the foreign group companies, taxable under Section 65(68) and 65(105)(k) up to 30.06.2012 and under Section 65B(44) thereafter - HELD - The nature of a secondment arrangement must be determined from the agreements and the substance of the transaction and not from its nomenclature. The International Mobility Agreement preserves the continuing employment with the Home Unit, which prevails in case of conflict, the assignment is temporary, and the reference salary, social security, pension, governing law and termination entitlements remain tied to the foreign unit. Operational control, payment through the Indian payroll and TDS deduction cannot be considered in isolation, since the question is whether in substance the foreign group company made its personnel available to the Appellant. The Hon'ble Supreme Court has held on similar facts that the overseas entity provides manpower supply service, which has been followed by this Tribunal and a Larger Bench. Absence of a mark-up on salary reimbursements does not by itself negate the service or the consideration. The decision under the GST regime relates to a different statutory context and cannot displace the binding decision governing the service tax regime. From 01.07.2012 the supervision of secondees by the Appellant does not bring the underlying supply by the foreign group companies within the exclusion for services provided by an employee to an employer under Section 65B(44) - The arrangement is held to be supply of manpower, and the finding of taxability and classification in the impugned order are upheld - Invocation of extended period of limitation and penalty under Section 78 of Finance Act, 1994 in respect of secondment of personnel - Revenue alleged suppression with intent to evade tax for the period from July 2012 onwards, while Appellant contended that the issue was interpretational and became clear only after the decision of the Hon'ble Supreme Court, and Revenue contended that revenue neutrality is untenable as reverse charge tax must be paid in cash - Whether the extended period under the proviso to Section 73(1) is invocable, whether penalty under Section 78 is sustainable, and whether revenue neutrality is tenable - HELD - Mere non-payment of duty, without fraud, suppression or wilful misstatement, does not justify the extended period, and wilful default requires a positive act revealing intent to evade duty. The dispute is interpretational, the period in dispute precedes the decision of the Hon'ble Supreme Court which itself restricted the demand to the normal period, and this principle has been followed by this Tribunal and the Larger Bench, which also set aside the penalties. Revenue has not demonstrated any deliberate attempt to evade tax. Entitlement to CENVAT credit does not extinguish the reverse charge liability payable in cash, but revenue neutrality is relevant to intent to evade tax and supports setting aside the extended period and penalty - The extended period is not invocable, the demand from July 2012 is restricted to the normal period, and the matter is remanded solely for verification and re-quantification of the demand and interest. The penalty under Section 78 is set aside, interest under Section 75 is payable on the surviving tax, the claim for refund of the amount paid under protest is to be considered after verification, and the Appellant's appeal is partly allowed - Departmental appeal against dropping of demand for the period prior to July 2012 on secondment of personnel - Adjudicating authority dropped the demand for the period up to June 2012, and Revenue contended that the temporary deputation constituted Manpower Recruitment or Supply Agency Service and that the Board Circular was not considered - Whether the demand dropped for the period prior to July 2012 can be restored - HELD - Although the secondment was taxable as Manpower Recruitment or Supply Agency Service even prior to 01.07.2012, the departmental appeal cannot succeed unless the demand survives the normal period of limitation. The SCN was issued on 14.10.2014 and the extended period cannot be invoked, so the demand for the period prior to July 2012 falls beyond the normal period - The demand dropped cannot be restored and the Department's appeal is dismissed.
Download File

Quick Search

/

Advance Search

GST Resources

/

Gst Rate Finder

Tax Vista

Your Weekly Tax Recap

By Dr. G. Gokul Kishore

Weekly Summary

VIL Video

57th GST Council Decisions...
By CA Vivek Jalan

Create Account

Security-Code
New Code?

Log In

New User ? Forgot Password ?

Forgot Password

Security-Code
New Code?
Please Note: This facility is only for Subscribing Members.

Email this page

Security-Code
New Code?

Feedback this page

Schedule a Demo

Schedule a demo to know the features and advantages of VILGST portal. Get to know the tips to find the desired results in faster way.

Security-Code
New Code?

Caselaw Request Form (CRF)

Didn’t find what you are searching for? No worries, please give us the following details and VIL will email you the desired Caselaws at the earliest:

Security-Code
New Code?