CAE Simulation Technologies Pvt. Ltd. Vs Commissioner of Central Excise (CESTAT Bangalore)
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore, partly allowed the appeal filed by the appellant against the service tax demand confirmed by the Commissioner. The dispute primarily concerned service tax liability under the reverse charge mechanism on technical services received from the appellant’s foreign holding company, management services received from an associate company, and amounts collected under a cost-sharing arrangement. During an audit covering the period from October 2007 to March 2012, the department found that the appellant had not discharged service tax on certain services received from its foreign entities. Based on the secondment agreement, the Commissioner treated the deployment of technical personnel by the holding company as taxable manpower supply and confirmed a demand of Rs. 25,57,292 along with interest and penalties.
The Tribunal observed that the appellant had already paid service tax of Rs. 12,42,164 along with interest on the technical services received but disputed the balance amount of Rs. 13,15,128, contending that it represented reimbursement of salary paid to a seconded employee. The Tribunal accepted this contention, holding that the reimbursable salary paid to the employee could not be included for levy of service tax under technical services. It also found that there was no evidence of suppression of facts because the payments were based on the secondment agreement placed on record. Consequently, the extended period of limitation was held to be inapplicable, and the demand relating to this issue was upheld only for the normal period.
