Sharing service of corporate staff with group companies is covered within ‘manpower recruitment or supply agency’

Commissioner of GST & Central Excise Vs Chemplast Sanmar Ltd (CESTAT Chennai)

CESTAT Chennai held that the sharing services of their corporate staff with the group of companies is covered by the definition of ‘manpower recruitment or supply agency’ as defined in Section 65(105)(k) of FA, 1994 read with section 65(68) ibid.

Facts- The Internal Audit Group of LTU, Chennai conducted an audit of records of M/s Chemplast Sanmar Ltd (respondent). On verification of the records of the taxpayer, it was noticed that the services of corporate staff at the top-level management viz. legal, finance, taxation etc. in the respondents company was shared by the entire Sanmar group of companies and who at the end of each year, calculated the proportional cost of salaries of these staff borne by the respective companies based on their turnover and paid it to Chemplast. This system of supply of skilled manpower appeared to fall within the purview of taxable services under ‘Manpower Recruitment and Supply Services’ as defined in section 65(105)(k) of the Finance Act, 1994, read with section 65(68) ibid and hence chargeable to service tax.

Therefore, a Show Cause Notice was issued to M/s. Chemplast Ltd. seeking to demand Service Tax of Rs.96,70,383/-. After due process of law, the matter was adjudicated. The original authority dropped all proceedings. Aggrieved by the said order, Revenue is before us in appeal.

Conclusion- Held that the respondent sharing services of their corporate staff with the Sanmar group of companies is covered by the definition of ‘manpower recruitment or supply agency’ as defined in Section 65(105)(k) of FA, 1994 read with section 65(68) ibid.

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