No Service Tax on Manpower Supplied by Parent Company to Its Project Office in India: CESTAT [Read Order]
CESTAT held that no service tax is payable on manpower supplied by a parent company to its project office in India, as it amounts to self service.
No Service Tax - Manpower Supplied - Parent Company - Its Project Office - India - CESTAT - taxscan
No Service Tax - Manpower Supplied - Parent Company - Its Project Office - India - CESTAT - taxscan
The Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) held that no service tax is payable on manpower supplied by a parent company to its project office in India, as such transactions amount to services rendered to oneself.
The appeal was filed by the Principal Commissioner of CGST and Central Excise, Delhi East, against Oriental Consultant Company Ltd., a project office of Oriental Consultants Co. Ltd., Japan. The department alleged that the project office in India had received manpower supply services from its parent company abroad and was liable to pay service tax under the Reverse Charge Mechanism.
The Commissioner of CGST had earlier dropped the service tax demand of Rs. 3.80 crore for the period from July 2012 to March 2015. The Revenue challenged this order before the Tribunal, arguing that the services received from the overseas office were taxable under the category of “Manpower Supply Services” and relied on the Supreme Court’s ruling in CC, CE & ST, Bangalore (Adjudication) v. Northern Operating Systems Pvt. Ltd.
The respondent’s counsel argued that the project office and the parent company were the same legal entity. They explained that the project office was established in India only to execute contracts entered into by the Japanese company and that invoices were raised and payments received directly in the name of the parent company.
The counsel argued that a person cannot provide services to oneself and relied on several judicial precedents, including SNC Lavalin Inc. v. CST, Delhi and Lea International Ltd. v. CST, Delhi.
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The bench comprising Ms. Binu Tamta (Judicial Member) and Mr. P.V. Subba Rao (Technical Member) observed that the project office and the parent company are not distinct entities for the purpose of service tax. It pointed out that the expenses recorded in the accounts were part of internal financial arrangements and did not represent consideration for any taxable service.
The tribunal explained that while the Revenue relied on the Supreme Court’s decision in Northern Operating Systems Pvt. Ltd., the facts of that case were different because it involved secondment of employees between two separate legal entities.
Applying the principle laid down by the Supreme Court, the tribunal found that in the present case, the parent company and its project office are one and the same entity.
The tribunal dismissed the Revenue’s appeal and upheld the order of the Commissioner, confirming that no service tax was payable on such intra-entity manpower arrangements.
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