Metal One Corporation India Pvt Ltd Vs Union of India & Ors. (Delhi High Court)
Conclusion: Foreign entities including Sony India Pvt. Ltd. was absolved of liability to pay Goods and Services Tax ( GST ) on the salaries paid to seconded employees as the value of the service rendered would have to be treated as ‘Nil’ in light of a circular No. 210/4/2024-GST dated 26.06.2024 released by the Central Board of Indirect Taxes and Customs. Once the position of the CBIC Circular to govern all concerned assessees Pan-India was laid down, penalty proceedings or imposition of interest would not sustain.
Held: Assessee was an entity which stands duly registered under the Act in the States of Delhi, Maharashtra and Tamil Nadu. It was stated to have entered into individual employment agreements with the employees of Metal One Corporation Japan, its parent entity, who then also became employees of assessee. It was averred that the Supreme Court in CCE & Service Tax vs. Northern Operating Systems (P) Ltd. had held that transactions in which an overseas entity had seconded employees to an Indian entity and then charged the employees‟ salaries borne by the Indian company in the form of reimbursement, the same would qualify as manpower supply by the overseas group company to the Indian subsidiary. It was this decision which appeared to have triggered the respondents into action and the various SCNs coming to be consequently issued. Metal One further apprised the Court of tax demand issued in terms of Section 73(5) of the GST Act and allied Show-Cause Notices ( SCN ) which had been impugned in the present proceedings. It was held that during the investigation, assessee appeared to have asserted before the authorities that the judgment in Northern Operating Systems (P) Ltd. could not be ipso facto applied to all cases irrespective of the factual scenario which may obtain. It was conceded that no invoices were generated. In view of the above and in light of the explicit terms of the Circular No. 210/4/2024-GST dated 26.06.2024, the value of the service rendered would have to be treated as ‘Nil’. This would lead one to the inescapable conclusion of no perceivable or plausible tax liability possibly being created. Consequently, the proceedings initiated in terms of the impugned SCNs‟ and their continuance would be futile and impractical. The impugned SCNs were essentially rendered impotent and would serve no practical purpose. Sony India Private Limited, had of its own violation and undisputedly, discharged the tax liability proceeding on the basis of Rule 28 and a perceived obligation to pay tax under the Act. The Order-in-Original however imposed a liability of interest and penalty upon that writ petitioner by invoking Section 15 along with Section 73(9). It was also undisputed that Sony India Private Limited had not only paid the tax but had also taken credit on a reverse charge basis. Once the position to govern all assessees pan-India came to be clarified by CBIC, the continuation of penalty proceedings or for that matter the imposition of interest would not sustain. In light of the stand taken by the CBIC, assessee, Sony India Private Lim-ited, would have stood absolved of all tax liabilities and implications flowing from the Act.
