Case Law Details
Mitsubishi Electric India Pvt. Ltd. Vs. Union of India & others (Punjab and Haryana High Court)
The Punjab and Haryana High Court has granted a stay on the GST demand of Rs. 20.46 Crores imposed on Mitsubishi Electric India Pvt. Ltd. The case revolves around salaries paid to seconded employees and the tax implications arising from the Apex Court’s clarification. Explore the details and the court’s interim decision.
Detailed Analysis:
1. Background of the Case:
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- Mitsubishi Electric faces a GST demand of Rs. 20.46 Cr for payments made to seconded employees under a Secondment & Cost Reimbursement Agreement with its parent company in Japan.
- The demand is based on the Apex Court’s clarification, following the precedent set in C.C., C.E. & S.T., Bangalore v. Northern Operating Systems Pvt. Ltd.
2. Petitioner’s Response:
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- Mitsubishi Electric paid Rs. 8,00,46,776/- on the total amount of Rs. 4,44,704,312/- to its parent company after the Apex Court’s decision.
- The respondent authorities initiated an investigation, and subsequent proceedings were closed without a show cause notice but with the right to investigate remaining tax duties.
3. Subsequent Developments:
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- A notice dated 02.08.2023 sought clarification on tax deposit on the Indian component of the salary.
- Despite detailed representations by the petitioner and objections raised, a show cause notice dated 29.09.2023 was issued under Section 73(8) of the Act.
4. Legal Precedent: The petitioner cites a similar matter before the High Court of Karnataka, where an interim order was passed in favor of M/s Alstom Transport India Ltd.
5. Court’s Interim Decision: The Punjab and Haryana High Court issues a stay on further proceedings based on the show cause notice dated 29.09.2023, considering the pending matter and the potential impact on the writ petition.
Conclusion: The interim decision by the Punjab and Haryana High Court provides relief to Mitsubishi Electric, staying further proceedings related to the GST demand on salaries paid to seconded employees. The court’s action acknowledges the ongoing legal considerations and aims to prevent any irreparable consequences during the petition’s pendency.
FULL TEXT OF THE JUDGMENT/ORDER OF PUNJAB AND HARYANA HIGH COURT
Inter alia contends that the petitioner has entered into Secondment & Cost Reimbursement Agreement dated 31.03.2019 (Annexure P-2) with Mitsubishi Electric Corporation, Japan, the parent company wherein certain employees have been seconded for service in India. While referring to the salary component it is pointed out that certain amounts are paid in Indian currency whereas certain amounts are paid in Japanese Yen, to be remitted abroad. It is submitted that on account of the judgment of the Apex Court in C.C., C.E. & S.T., Bangalore [Adjudication] V. Northern Operating Systems Pvt. Ltd., 2022 [61] GSTL 129, the law was clarified regarding providing of manpower supplying service being a taxable service on 19.05.2022. In view of the same, investigation started on 11.08.2022 (Annexure P-4) regarding the GST implications and of conducting an internal due diligence.
The petitioner-Company paid a sum of Rs.8,00,46,776/- on the total amount of Rs.4,44,704,312/- paid by it to its parent company in view of the decision by the Apex Court and interest element of Rs.2,79,80,800/- was also paid which is mentioned in the letter dated 31.10.2022 (Annexure P-6). Having received the same, the respondent-authorities closed the proceedings without issuance of the show cause notice as per the provisions of Section 73(6) of the Central Goods Service Tax Act, 2017 (for short, the ‘Act’) leaving its right open to investigate for remaining tax duties and liabilities and other issues for the similar period.
Thereafter, vide communication dated 02.08.2023(Annexure P-8), petitioner was put to notice as to whether proper tax along with applicable interest had been deposited by the petitioner on the Indian component for payment or not. Detailed reply was filed on 31.08.2023 (Annexure P-9) leading to the amount being quantified vide order dated 18.09.2023 (Annexure P-10) wherein after noticing the amounts deposited an additional sum of Rs.20,46,87,723/- + applicable interest was quantified and the petitioner was advised to pay the same by 22.09.2023 failing which show cause notice was to be issued under Section 73(1) of the Act. Petitioner again submitted a detailed representation dated 27.09.2023 (Annexure P-11) wherein specific objections were then raised that the amount deposited in Indian currency of the salary component was not covered and secondly a closure letter had already been issued. Inspite of that, notice dated 29.09.2023 (Annexure P-1) was issued under Section 73(8) of the Act that if the amount be paid within 30 days no penalty will be payable in respect of the such tax and interest.
It is contended that a similar issue has also come up for consideration before the High Court of Karnataka in WP-23915-2023 titled M/s Alstom Transport India Ltd. Vs. The State of Karnataka and an interim order has been passed on 02.11.2023 keeping in view the fact that the writ petition would be rendered infructuous if there is no interim protection.
Notice of motion.
Mr. Deepak Kakkar, Advocate accepts notice for Mr.Tejinder K.Joshi, Sr. Standing Cousnel, for respondents No.1 to 3.
To come up for service of respondent No.4 on 13.02.2024.
Further proceedings are stayed in pursuance of the show cause notice dated 29.09.2023 (Annexure P-1).
