Bharathi Cement Corporation Pvt Ltd Vs Commissioner of Central Tax Guntur – GST (CESTAT Hyderabad)
In this case, the appellant challenged an order that confirmed a demand of service tax on reimbursements made to a foreign company in relation to expatriate employees working in India. The dispute arose after the department alleged that payments made by the appellant to a foreign entity towards the salaries and related costs of expatriate employees constituted consideration for taxable services. The department treated these payments as taxable under the category of management consultancy services and demanded service tax along with interest and penalties for the period from December 2010 to June 2013.
The appellant had entered into an agreement with a foreign company for management consultancy services and paid service tax on those services under the reverse charge mechanism. Separately, certain expatriate employees associated with the foreign company were working in India. The appellant entered into individual employment agreements with these expatriates. Part of the salary was paid directly to the employees in India, while statutory social security contributions and some other components were paid by the appellant to the foreign company, which then remitted the amounts to the employees’ accounts in France. The appellant also filed income tax returns in India on the expatriates’ global salaries.
