Case Law Details
Komatsu India Pvt. Ltd. Vs. Commissioner of Service Tax (CESTAT Chennai)
The issue under consideration is whether the service tax under RCM will be levied on deputed employees working under control, direction and supervision of overseas companies?
CESTAT states that, on perusal of the contract entered into between both the sides, we find that there is no existence of service provider-service recipient relationship. Further, the appellant had also separately entered into contract with the employees deputed by the group companies, providing for payment of salary and other benefits. Mere transfer of fund on security reason for the benefit of the family of the employees based in abroad cannot create the tax liability under such category of taxable service. It is not the case of Revenue that over and above the amount paid to the employees or their families, any other additional amounts were charged by the overseas entities or paid by the appellant towards such deployment of the employees. Thus, under such circumstances, it cannot be said that the overseas group companies have provided the service of recruitment or supply of man power and the appellant should be liable to pay service tax as a recipient of such service under the reverse charge mechanism. CESTAT find that this Tribunal in the case of Nissin Brake India Pvt. Ltd. (supra) has held that deputed employees working under control, direction and supervision of the assessee cannot be termed as a taxable service, leviable to service tax under the category of “Man Power Recruitment or Supply Agency Service”. The said order of the Tribunal was upheld by the Hon‟ble Supreme Court, reported in 2019 (24) G.S.T.L J171 (SC). Further, CESTAT also find that in the case of Bain & Co. India Pvt. Ltd. (supra), this Tribunal has held that just because the social security contribution in respect of the expatriate employees was paid by the holding company, the expatriate employees cannot be treated as the employees of the holding company provided to the Indian company on man power supply or recruitment basis. In view of the above discussions, CESTAT do not find any merits in the impugned order passed by the Ld. Adjudicating authority. Accordingly, after setting aside the same, the appeal is allowed in favour of the appellant.
FULL TEXT OF THE CESTAT JUDGEMENT
Briefly stated, the facts of the case are that the appellant herein, is engaged in the manufacture of dump trucks and other allied items. The appellant’s company belongs to the Komatsu Group, having their business establishments in the countries of Japan and Singapore. During the initial period of setting up of the factory premises, the appellant had entered into secondment agreement with its parent companies, by which the employees of the said companies were deputed to work in the appellant’s factory. For deployment of the employees, the appellant had incurred expenditure in foreign exchange towards payment of salary to the employees. The modus operandi adopted by the appellant regarding deployment of the employees of the parent company and payment of salaries to them was considered by the department as a taxable service under the head „Manpower Recruitment or Supply Agency Service‟, defined under Section 65 (68) of the Finance Act, 1994. Accordingly, show cause proceedings were initiated on the premise that the appellant should be liable to pay service tax under reverse charge mechanism, as a recipient of such taxable service. The learned adjudicating authority has confirmed the adjudged demands on the appellant, holding that by deploying the employees to the appellant company, the parent company located abroad had provided the taxable service and the appellant being a recipient of service in India, is liable to pay service tax under reverse charge mechanism in terms of Section 66A ibid. Feeling aggrieved with the impugned order dated 31.12.2012, the appellant has preferred this appeal before the Tribunal.
Please become a Premium member. If you are already a Premium member, login here to access the full content.
