Case Law Details
Target Corporation India Pvt Ltd Vs C.C.E. (CESTA Bangalore)
Definition of ‘Manpower Recruitment or Supply Agency’ seeks to bring under its ambit, two types of activities i.e. recruitment of manpower and supply of manpower and further the service becomes the taxable service only if provided by a manpower recruitment or supply agency but in the present case, we are concerned only with the supply of manpower. Further, we find that post July 2012, the definition of service specifically incorporated seeks to exclude certain transactions from the ambit of service and provision of service by an employee to the employer in the course of or in relation to his employment stands excluded from the definition of service. We also note that the legal position post negative list regime does not make any departure from the settled position of law as existed before 2012 with respect to the service tax implications on deputation of employees. In fact, the above exclusion in the definition of service amplifies the position of law to keep employees providing service to the employer in the course of their employment out of the purview of service tax. We have also examined the agreements entered into by the appellant with a group company which are specifically for provision of certain specialized services and are not related to „supply of manpower‟ which is evident from various clauses in the Agreements and we also find that group companies are not in the business of supplying manpower. Further, we find that the persons seconded to the appellant working in the capacity of employees and payment of salaries etc is made to such employees by group companies only for disbursement purposes and hence employee-employer relationship exist and such an activity cannot be termed as “manpower recruitment or supply agency” and the whole arrangement between the appellant and its group companies does not fall under the taxable service of manpower recruitment or supply agency service as defined under the Finance Act, 1994. We also find that there is no service provider-recipient relationship in the present case, as required by Section 65(105)(k). This issue is no more res integra and has been settled by various decisions of the Tribunals and the High Courts and upheld by the Hon‟ble Apex Court. We may refer to few of the decisions, in the case of Honeywell Technology Solutions Pvt. Ltd. Vs CST, Bangalore, 2020-TIOL-1277-CESTAT-BANG wherein recently this Tribunal based on identical set of facts set aside the demand in as much as there was a distinct employee-employer relationship between the seconded employee and the assessee. We also hold that method of disbursement of salary cannot determine the nature of the transaction and this issue was considered in the case of M/s. Volkswagen India Pvt. Ltd. v. CCE, Pune-I reported in 2014 (34) S.T.R. 135 (Tri. – Mumbai) which has been upheld by the Hon‟ble Apex Court in the case of Commissioner Vs Volkswagen India (Pvt.) Ltd. – 2016 (42) S.T.R. J145 (S.C.). We also find that in the case of Computer Sciences Corporation India Pvt. Ltd. v. Commissioner of Service Tax, Noida reported in 2014-TIOL-434– CESTAT DEL as affirmed by Commissioner of Central Excise v. M/s Computer Science Corporation India Pvt. Ltd. 2015 (37) S.T.R. 62 (All.) wherein the facts of the case were similar to the present case.
Further, the Hon’ble High Court of Gujarat in the case of Commissioner of Service Tax Vs Arvind Mills Ltd, 2014(35) STR 496=2014-TIOL-441-HC-AHM-ST has held that even if the actual cost incurred by appellant in terms of salary remuneration and perquisites is only reimbursed by group of companies, there remains no element of profit or finance benefit. The arrangement is that of the continuous control and the direction of the company to whom the holding company has deputed the employee, such an arrangement is out of the ambit to be called manpower supply service. This Tribunal also in an identical case decided by Final Order No. 70436/2019 dated11.10.2019 by relying upon the case of Volkswagen India Pvt. Ltd. Vs. CCE, Pune-I -2014 (34) STR 135(Tri.-Mumbai) and the above discussed case law has held that the expatriates working under the assessee are the employees of the assessee as there is an employer-employee relationship. As such, there is no supply of manpower service which is rendered to the appellant by the foreign/holding company. Further, in the case of M/s India Yamaha Motor (supra) the Division Bench of this Tribunal by relying upon the decision of Computer Science Corporation India Pvt. Ltd and CST Vs Arvind Mills Ltd came to the conclusion that in the case of seconded employees, service tax is not leviable under the category of manpower recruitment or supply of manpower service. Further, the Division Bench of this Tribunal recently in the case of Northern Operating Services Pvt. Ltd. Vide Final Order No. 20852-20854/2020 dated 23.12.2020 has allowed the appeal of the assessee and set aside the demand raised by the Department under the category of manpower recruitment or supply agency service. Further, the charge of service tax @ 15 dollar per employee per pay role cycle for processing pay role of the seconded employee by the Target USA cannot fall under the category of manpower recruitment or supply of manpower agency service as per the definition provided in Section 65(68) of the Finance Act, 1994. Further, we also hold that the ruling given by advance ruling authority was under the Income Tax Act, 1961 and the said ruling is not having any binding precedent under the Service Tax Laws. We also note that in the advance authority ruling, there is no finding to the extent of pay role processing.
In view of our discussion above and by following the ratio of the various decisions cited supra, we are of the considered view that the impugned order is not sustainable in law and hence we set aside the same by allowing the appeal of the appellant.
FULL TEXT OF THE CESTAT BANGALORE ORDER
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