KSPG Automotive India Pvt. Ltd. Vs Commissioner of Service Tax-I (CESTAT Mumbai)
Summary: The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Mumbai, considered an appeal filed by KSPG Automotive India Pvt. Ltd. against the Principal Commissioner’s order dated 23 May 2016 confirming a service tax demand of ₹7,71,24,785, together with interest and an equal penalty. The dispute concerned the deputation of employees to its associated German company, Pierburg GmbH, and payments recorded in foreign currency under the salary head. Following departmental audit, a show-cause notice dated 16 October 2015 sought service tax for financial years 2010-11 to 2013-14 by treating the arrangement as manpower supply service under the reverse charge mechanism.
The Tribunal considered the Supreme Court’s decision in Commissioner of Customs, Central Excise & Service Tax, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd., under which qualifying secondment arrangements constitute taxable manpower supply. It recorded the parties’ common position that, while the underlying demand could be sustainable in principle, the extended limitation period could not be invoked in the circumstances. Referring to Section 73(1) read with Section 73(6) of the Finance Act, 1994, the Tribunal examined the statutory 18-month normal limitation period and the conditions required for invoking the five-year extended period.
The Tribunal further noted the appellant’s submission that the last relevant payment was made on 28 May 2013 and its return for that period was filed on 25 October 2013. On that basis, the normal limitation period expired on 25 January 2015, whereas the show-cause notice was issued only on 16 October 2015. Finding the entire demand barred by limitation, the Tribunal allowed Service Tax Appeal No. 87016 of 2016 and set aside Order-in-Original No. PUN-EXCUS-001-PR.COM-002-16-17 dated 23 May 2016, with consequential relief, if any. Final Order No. 85409/2024 was pronounced on 17 April 2024.
Cases Discussed
- Commissioner of Customs, Central Excise & Service Tax, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd. — 2022 (61) G.S.T.L. 129 (SC); Civil Appeal Nos. 2289–2293 of 2021, decided 19.05.2022.
FULL TEXT OF THE ORIGINAL JUDGMENT/ORDER OF CESTAT MUMBAI
Confirmation of Service Tax demand of 7,71,24,785/-alongwith interest and equal penalty on secondment of employees by the Appellant to its associated Foreign Counterpart at Germany on reverse charge mechanism under the heading “Manpower Supply Service” is assailed by the Appellant in this appeal.
2. Facts of the case, in a nutshell, is that Appellant is engaged in providing taxable services such as GTA, Manpower, Consulting Engineer, BAS, BSS, IPR, Information Technology Software Service, etc. During scrutiny of its financial records by the Auditor of the Central Excise and Service Tax Department Pune Commissionerate, it was noticed that Appellant had shown expenditure in foreign currency under the heading ‘Salary’ and on being enquired it informed that some of its employees were deputed to its foreign counterpart M/s. ‘Pierburg’ GMBH, Germany, who are paid salary from India. Holding the same to be manpower supply service on secondment and allegedly suppression of fact of non-payment of Service Tax, the above demand was raised through show-cause notice dated 16.10.2015 for the financial year 2010-11 to 2013-14 that was adjudicated upon and resulted in confirmation of the demand referred above, which is assailed in this appeal.
3. We have heard submissions from both the sides and perused the case record. Argument is led by both sides with reference to provision of law and judicial decisions on the point but ultimately the consensus that emerged is that in view of Hon’ble Supreme Court judgment on the issue, as passed in the case of Commissioner of Customs, Central Excise & Service Tax, Bangalore (Adjudication) Vs. Northern Operating Systems Pvt. Ltd., secondment of employees by overseas entity for the purpose of completion of Assessee’s job amount to manpower supply and Assessee was service recipient for the same and, therefore, demand was sustainable but invocation of extended period was impermissible as Assessee had bonafide believe that it is not liable to pay any Service Tax, apparently for the reason that judicial decision on the similar line till pronouncement of Northern Operating Systems Pvt. Ltd. judgement by the Hon’ble Supreme Court was holding the field. But in the present case it could be noticed that show-cause notice was issued on 16.10.2015 up to the end of financial year 2013-2014 during the relevant period and in view of clear provision contained in Section 73(1) read with 73(6), the normal period for making demand through show-cause notice was 18 months from the relevant date and if any fraud, collusion, wilful misstatement, suppression of facts, contravention of any of the provisions of this Chapter or the Rules made thereunder with intent to evade payment of Service Tax is noticed in view of proviso to Section 73(1), Central Excise Officer can served notice for demand that could be extended up to 5 years. This being the statutory provision, the notice of demand being signed on 16.10.2015 and dispatched thereafter cannot be considered to have been sent within 18 months of the end of financial years, up to which demand is made i.e. up to 31st March 2014. We are, therefore, of the considered view that the show-cause notice is not issued in conformity to the law and, therefore, it was required to be quashed before initiation of adjudication proceeding.
4.In addition to our observation above, it would be worthwhile also to take on record the submission of learned Counsel for the Appellant. In filing detail of Audit reports for the period from October, 2008 to May, 2015, he stated that there were four Audits conducted and only in the last Audit report from January, 2014 to May, 2015, the fact of payment made in Foreign Exchange was noted but going by the annexure to the show-cause notice, in which detail of payment is reflected and Service Tax is calculated, the last date of payment was made on 28.05.2013. Appellant having filed its return for the said period on 25.10.2013, in view of clear provision contained in Section 73(6)(i)(a) wherein it has been mentioned that for the purpose of determination of “relevant date”, periodical return filed on the date showing particulars of Service Tax paid during the period to which return relates would be taken for the purpose of calculation of period of limitation of 18 months, which would end on 25.01.2015 the entire demand is barred by limitation.
5. We find force in the submissions of learned Counsel and we are in agreement with the contention made by the Appellant that this appeal is hopelessly barred by the period of limitation as the entire proceeding is carried out in gross violation of the position of law and deviation in any form from the statutory provision is impermissible. Hence the order.
THE ORDER
6. The appeal is allowed and the order passed by the Principal Commissioner of Central Excise & Service Tax, Pune-I vide Order-in-Original No. PUN-EXCUS-001-PR.COM-002-16-17 dated 23.05.2016 is hereby set aside with consequential relief, if any.
(Order pronounced in the open court on 17.04.2024)
