The Supreme Court’s division bench will review the matter of Secondment taxation soon. The bench has issued notice to the Central Excise and Service Tax department and tagged the matter with “Commissioner of GST and Central Excise Chennai vs. M/S Komatsu India Pvt. Ltd”.
The bench including Chief Justice Sanjeev Khanna and Justice Sanjay Kumar will hear the matter soon.
The instant appeal was filed by Mitsui Prime Advanced Composites India Pvt Ltd, against the decision rendered by the Customs, Excise and Service Tax Appellate Tribunal ( CESTAT ) upholding the levy of service tax on the salary reimbursement of seconded employees based on the Supreme Court decision in Northern Operating System Judgment.
Based on the facts from the CESTAT order, Mitsui India is engaged in the manufacture of PP Compounds. Mitsui Chemicals Inc. Japan deputed their employees for providing service in the factory premises of Mitsui India situated at Neemrana under an Agreement concerning the treatment of seconded employees between Mitsui Japan and the Mitsui India.
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According to the department, under the Agreement between Mitsui India and Mitsui Japan, Mitsui Japan deputed its employees to Mitsui India and the reimbursements of salary costs of the expats by Mitsui India to Mitsui Japan is the consideration for receipt of manpower supply services. Mitsui India would, therefore, be liable to pay service tax under the reverse charge mechanism for the manpower services imported from Mitsui Japan.
The CESTAT bench observed that, according to the decision of the supreme court in NOS case, “the Indian company would request the UK company to provide employees for the expertise required by the Indian company and the UK company would thereafter select the employees and second them to the Indian company. The employees seconded shall continue to be remunerated by the UK company. However, during the secondment period, the Indian company shall reimburse the UK company of all the remuneration of the employees, including but not limited to salary incentives and employment benefit.”
The CESTAT found the agreement of NOS and Mitsui to be similar. The Supreme Court in the NOS matter also held that the decisions of the Tribunal in Volkswagen India and Computer Sciences Corporation, are unreasonable and of no precedential value.
Thus, the tribunal upheld the service tax demand with interest and penalty issued by the commissioner. However, as Mitusi has preferred an appeal before the Supreme Court, the bench including the Chief Justice will consider the matter and dispose of it soon.
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