Delphi Automotive Systems Pvt. Ltd. Vs Commissioner of Service Tax (CESTAT Chandigarh)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh, considered an appeal filed by Delphi Automotive Systems Pvt. Ltd. against the order dated 31.12.2015 passed by the Commissioner of Service Tax confirming a service tax demand of Rs.6,32,493/- under Section 73(1) of the Finance Act, 1994, along with interest under Section 75, an equal penalty under Section 78 and a penalty of Rs.10,000/- under Section 77. The appellant, engaged in manufacturing wiring harnesses for automobiles, had entered into a secondment agreement with Delphi Automotive Systems Private Limited, Singapore. Under the arrangement, the deputed employee worked under the control and supervision of the Indian company, which reimbursed the salary paid by the Singapore entity. Based on entries appearing in the appellant’s balance sheet, the Department issued a show-cause notice dated 23.10.2009 proposing service tax of Rs.39,05,38,609/- on various transactions, including technical know-how, software maintenance, business support and salary reimbursements. The Commissioner dropped a substantial portion of the demand and confirmed Rs.15,64,957/-, out of which Rs.9,32,464/- had already been discharged. The remaining dispute concerned Rs.6,32,493/- relating to salary reimbursement under Manpower Recruitment and Supply Agency Service.
Before the Tribunal, the appellant confined its arguments to limitation without pressing the grounds on merits. It submitted that the disputed demand related to financial years 2006-07 and 2007-08, whereas the show-cause notice was issued only on 23.10.2009, beyond the applicable normal limitation period of one year. The appellant contended that the Department had failed to establish fraud, wilful misstatement or suppression of facts necessary for invoking the extended period. It further argued that the taxability of overseas employee secondment had remained under litigation and was ultimately addressed by the Supreme Court in CC, CE & ST, Bangalore (Adjudication) Vs Northern Operating Systems Pvt. Ltd., 2022 (61) G.S.T.L. 129 (SC). The appellant maintained that its bona fide belief regarding non-taxability, together with the revenue-neutral nature of the transaction, did not justify extended limitation.
The appellant relied upon several Tribunal decisions involving Tesco Bengaluru Private Limited, Daimler India Commercial Vehicles Pvt. Ltd., AGS Customer Services (India) Pvt. Ltd., Fuji Furukawa Engineering and Construction Co. (India) Private Limited, Halcrow Consulting India Private Limited, KSPG Automotive India Pvt. Ltd. and Renault Nissan Automotive India Pvt. Ltd. It submitted that these decisions, following the Supreme Court’s ruling in Northern Operating Systems, had rejected the invocation of extended limitation in comparable secondment disputes. The appellant also relied upon GD Goenka Pvt. Ltd. Vs Commissioner of CGST, Delhi South to contend that the demand arose from departmental audit and information already available in its financial records. The Revenue, however, supported the findings recorded in the impugned order.
The Tribunal observed that the disputed demand pertained to financial years 2006-07 and 2007-08, while the show-cause notice had been issued on 23.10.2009. It found that the Department had not produced material establishing fraud, wilful misstatement or suppression of facts by the appellant. The Tribunal also noted that the secondment issue had remained under litigation until the Supreme Court’s decision in Northern Operating Systems, which rejected extended limitation in the circumstances considered therein. Following that judgment and the subsequent Tribunal decisions cited by the appellant, CESTAT held that the demand could not survive on limitation grounds. It further observed that the proceedings originated from departmental audit. Accordingly, the Tribunal set aside the impugned order and allowed the appeal on limitation alone, without examining the merits of the service tax demand.
Cases Discussed
- Tesco Bengaluru Private Limited, Shri Karandeep Singh and Raja Pawha Vs Commissioner of Central Excise and Service Tax, Bengaluru — 2025 (2) TMI 1054 (CESTAT Bangalore).
- Daimler India Commercial Vehicles Pvt. Ltd. Vs Commissioner of CGST & C. Ex., Chennai Outer Commissionerate — 2025 (7) TMI 148 (CESTAT Chennai).
- AGS Customer Services (India) Pvt. Ltd. Vs Commissioner of Service Tax-I, Pune — 2024 (6) TMI 1113 (CESTAT Mumbai).
- Commissioner of Central Tax, Bangalore North Vs Fuji Furukawa Engineering and Construction Co. (India) Private Limited — 2024 (5) TMI 372 (CESTAT Bangalore).
- Halcrow Consulting India Private Limited Vs Commissioner of Service Tax, Delhi-II — 2024 (5) TMI 130 (CESTAT New Delhi).
- KSPG Automotive India Pvt. Ltd. Vs Commissioner of Service Tax-I, Pune — 2024 (4) TMI 682 (CESTAT Mumbai).
- Renault Nissan Automotive India Pvt. Ltd. Vs Commissioner of GST and Central Excise — 2023 (7) TMI 635 (CESTAT Chennai).
- GD Goenka Pvt. Ltd. Vs Commissioner of CGST, Delhi South — 2023-TIOL-782-CESTAT-DEL.
- CC, CE & ST, Bangalore (Adjudication) Vs Northern Operating Systems Pvt. Ltd. — 2022 (61) G.S.T.L. 129 (SC).
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER OF CESTAT CHANDIGARH
1. The present appeal is directed against impugned order dated 31.12.2015 passed by the Commissioner of Service Tax, whereby the learned Commissioner has confirmed the demand of service tax of Rs.6,32,493/-under Section 73(1) of the Finance Act, 1994 along with interest under Section 75 and also imposed an equal penalty under Section 78 and a penalty of Rs.10,000/- under Section 77 of the Act.
2. Briefly stated facts of the present case are that the appellant is engaged in the manufacturing of wiring harness for automobiles and is registered with the Service Tax department under the categories of Transport of Goods by Road, Management Consultants, Consulting Engineers and Design Services. The appellant entered into agreement for transfer of personnel on secondment with M/s Delphi Automotive Systems Private Limited, Singapore (in short ‘Delphi Singapore’). During the period of secondment, the seconded employee worked under the control and supervision of the appellant and the Appellant reimbursed the salary which was paid by Delphi Singapore to the seconded employee. Based on the figures appearing in the balance sheet of the appellant, SCN was issued demanding the service tax amounting to Rs.39,05,38,609/- on various components such as Technical know-how, Software maintenance services, Business and Administration support, amount of reimbursed salary etc for the relevant period along with interest and penalty. The learned Commissioner, vide the impugned order, dropped the demand of service tax amounting to Rs.38,89,73,652/- and confirmed the remaining demand of service tax amounting to Rs.15,64,957/- along with interest and penalty. Since, the appellant discharged the service tax liability of Rs.9,32,464/- along with interest and penalty and the same was communicated to the department, the remaining demand of service tax amounting to Rs.6,32,493/- has been confirmed on the amount of salary reimbursed to Delphi Singapore under the head ‘Manpower Recruitment and Supply Agency Service’ under Section 65(105)(k) read with Section 65(68) of the Act for the period 2006-2007 and 2007-2008. Against the portion of the impugned order confirming demand of service tax amounting to Rs.6,32,493/-, the appellant is in appeal before us.
3. Heard both the parties and perused the material on record.
4. The learned Counsel for the appellant submits that though the appellant has taken a number of grounds on merits as well as on limitation, but she confines her submissions on limitation alone.
4.1 The learned Counsel submits that the entire demand is barred by limitation. She further submits that vide the impugned order, demand of service tax has been confirmed for the period from 2004- 05 to 2007-08 as proposed in the SCN dated 23.10.2009. She further submits that the demand of service tax on the amount of salary reimbursed to Delphi Singapore under the head ‘Manpower Recruitment and Supply Agency Service’ pertains to the period 2006-07 and 2008-09. She further submits that the demand proposed vide the SCN dated 23.10.2009 for the period 2006-07 and 2007-08 is barred by limitation as during this period, the time limit to issue the SCN was one year from the relevant date i.e. the due date of filing the half-yearly returns.
4.2 The learned Counsel submits that the department has failed to produce any evidence on record to show that there was a fraud, wilful misstatement or suppression on the part of the appellant. She also submits that the issue in the present case involves the interpretation of complex provisions and the appellant was under the bona fide belief that the service tax is not payable on the amount of salary reimbursed to Delphi Singapore as during the period 2006-07 and 2007-08 as this issue was under litigation. She further submits that this issue only attained finality with the judgement of the Hon’ble Supreme Court in the case of CC, CE & ST, Bangalore (Adjudication) vs. M/s Northern Operating Systems Pvt Ltd – 2022 (5) TMI 967 SUPREME COURT. She also submits that the entire situation is revenue neutral as the appellant would be entitled to the credit of service tax paid on this service and therefore, extended period cannot be invoked in the present case. She further submits that the Hon’ble Supreme Court has also dropped the demand for the period beyond the normal period of limitation in the case of Commr vs. M/s Northern Operating Systems Pvt Ltd (supra). She further submits that on the basis of the said judgment of Hon’ble Supreme Court, various benches of the Tribunal have set aside the demand of service tax for the extended period. In this regard, she places reliance on the following cases:
a) Tesco Bengaluru Private Limited, Shri Karandeep Singh and Raja Pawha vs. Commissioner of Central Excise and Service Tax, Bengaluru – 2025 (2) TMI 1054 CESTAT Bangalore
b) Daimler India Commercial Vehicles Pvt. Ltd. vs. Commissioner of CGST & C. Ex., Chennai Outer Commissionerate – 2025 (7) TMI 148 CESTAT Chennai
c) M/s AGS Customer Services (India) Pvt. Ltd. vs. Commissioner of Service Tax-I, Pune – 2024 (6) TMI 1113 CESTAT Mumbai
d) Commissioner of Central Tax, Bangalore North vs. M/s Fuji Furukawa Engineering and Construction Co. (India) Private Limited (FFECI) Level IV – 2024 (5) TMI 372 CESTAT Bangalore
e) M/s Halcrow Consulting India Private Limited vs. Commissioner of Service Tax, Delhi-II – 2024 (5) TMI 130 CESTAT New Delhi
f) M/s KSPG Automotive India Pvt. Ltd. vs. Commissioner of Service Tax-I, Pune – 2024 (4) TMI 682 CESTAT Mumbai
g) M/s Renault Nissan Automotive India Pvt. Ltd. vs. Commissioner of G.S.T. and Central Excise – 2023 (7) TMI 635 CESTAT Chennai
4.3 She further submits that the present proceedings were initiated on the basis of the audit conducted and the SCN was issued on the basis of the figures appearing in the balance sheet and therefore, there is no question of invoking the extended period of limitation. In this regard, she relies on the decision of principal bench of the Tribunal in the case of GD Goenka Pvt Ltd vs. Commissioner of CGST, Delhi South – 2023-TIOL-782-CESTAT-DEL.
5. On the other hand, the learned Authorized Representative for the Revenue reiterates the findings of the impugned order.
6. After considering the submissions made by both the parties and perusal of the material on record, we find that the entire demand is barred by limitation because the demand pertains to year 2006-07 and 2007-08 and the SCN was issued on 23.10.2009. As the department has not brought any material on record to show that there was a fraud, wilful misstatement or suppression on the part of the appellant. Further, we find that the issue involved in the present case was under litigation and finally, the Hon’ble Supreme Court in the case of Commr vs. M/s Northern Operating Systems Pvt Ltd (supra) has settled the issue. The Hon’ble Supreme Court in the said judgment has also dropped the demand beyond the normal period of limitation and various benches of the Tribunal, after following the said judgment of Hon’ble Supreme Court, have also dropped the demand of service tax for extended period in various cases (as cited in above para 4.2). Moreover, the demand was raised on the basis of audit and it is a settled law that extended period cannot be invoked when the demand is based on the audit.
7. Keeping in view the above discussion, we are of the considered opinion that the present case is squarely covered by various decisions on limitation (cited supra) and therefore, by following the ratios of the above cited decisions, we set aside the demand on limitation alone without going into the merits of the case.
8. In result, the impugned order is set aside and the appeal is allowed on limitation.
(Operative part of the order pronounced in the open court)
