Assessee can’t be treated as ‘Manpower Supply Agency’ on Deputation of Employees to Subsidiary Company: CESTAT [Read Order]

Man Power Recruitment - Manpower Supply Agency

The Delhi bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) in the case of M/s Punj Lloyd Ltd versus CST Delhi, has held that an Assessee can’t be treated as ‘ Manpower Supply Agency ’ on deputation of employees to subsidiary group company for the purpose of imposing service tax.

The issue before the Tribunal was regarding the service tax liability of the appellant-Company with reference to tax liability on manpower services provided to group company of the appellant.

Proceedings were initiated against the appellant by issuing show cause notice and the appellant contested for the same, therein original authority raised the demand and confirmed the penalty under section 78 and 77 of the Finance Act, 1994.

Before the Tribunal, the Assessee contended that they are engaged in the infrastructural construction activities so that they shared their employees with a wholly owned subsidiary company.

The counsel for Assessee also submitted that the expenditure on such deputation of employees was reimbursed by the subsidiary company. Assessee pressed the decision of Tribunal in M/s Paramount Communication Ltd and Volkswagen India Pvt Ltd where it has been held that sending staff to Group Company and getting reimbursement of expenditure cannot be taxed as manpower supply services.

Accepting the contentions of the assessee, the Technical Member Satish Chandra, President B. Ravichandran, observed that the service tax liability on appellant on this issue cannot be sustained.

The bench further relied on the decision in Airbus Group India Pvt Ltd wherein it was held that deputing employees to group company cannot be considered as the supply of manpower.

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