No service tax on amount paid to employees deployed from a company outside India

Imasen Manufacturing India Private Limited Vs. Assistant Commissioner (Commissioner Appeals, CGST, Jaipur)

In M/s Imasen Manufacturing India Private Limited vs. Assistant Commissioner, CGST Division-E, Behror [OIA No. 202(SM)ST/JPR/2021 dated June 9, 2021], M/s Imasen Manufacturing India Private Limited (Appellant) is engaged in the manufacture of Car Seat/ Car Seat Adjuster. The Appellant deputed seconded employees from M/s Imasen Electric Industrial Company Ltd., Japan (IEIC) and entered into a contract of employment with each employee and paid for the same to IEIC.

It is to be noted that wherein salary was payable by IEIC to the employees but the Appellant paid some amount to the employees for their well-being.

A show cause notice was issued to the appellant for recovery of service tax on amount paid by the Appellant to the employees for their well-being along with interest and penalty.

Commissioner (Appeals) stated that the services are provided by IEIC, located outside India to the Appellant and was not taxable especially when the Appellant treated the amount paid to the said persons as salary in terms of Income Tax Rules, 1962 and deducted the income tax on the same, which shows that the said persons worked as employees of the Appellant. Therefore, there is no doubt about the employer-employee relationship, thus the Appellant is not liable to pay any service tax and consequently no interest and penalty leviable.

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