By Puloma Dalal, Jayesh Gogri, Mandar Telang Chartered Accountants
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Whether service tax is payable under reverse charge mechanism under ‘manpower supply services’ being secondment of foreign employee from group companies?
Facts:
For furtherance of business operations in India, the appellants hired certain overseas employees who either directly employed by the appellants or were transferred from other group companies situated overseas. During the period of the secondment of these employees, they were treated as employees of the appellants and accordingly, the appellants gave social security benefit such as provident fund. TDS was deducted on their salaries and issued Form 16 and Form 12BA under the Income-tax Act, 1961. The appellants also remitted certain social security and other benefits for these employees as required under foreign laws to its group companies. The appellants also contested that the amounts remitted to overseas group companies were without any margin. However, lower authorities treated remittance to foreign group companies as gross consideration paid for availing manpower recruitment and supply services (import of services) covered under reverse charge mechanism.
Held:
Relying on Mumbai Tribunal’s decision in case of Volkswagen India (Pvt.) Limited vs. 2014 (34) S.T.R. 135 (T), the appeal was allowed. Since Assistant Commissioner, (appeal against which lies only before Commissioner (Appeals)), had ordered adjustment of refund claim against this demand, Tribunal could not pass an order directing the refund. However, Tribunal declared that the petitioner was entitled to refund claim ex debito justita. Consequentially, Tribunal also held that the petitioner was at liberty to apply for refund which shall be disposed of by appropriate authority expeditiously.
