Service Tax Liability for Overseas Employee Secondments: Supreme Court Issues Notice to Revenue in Tesco Bengaluru Case [Read Order]
The appellate tribunal found that the secondment agreements mirrored the arrangements scrutinized in Northern Operating Systems, where secondees, though under the day-to-day control of the Indian entity, remained on the payrolls of the foreign employer, making the arrangement taxable as manpower supply.
Service - tax - liability - Taxscan
Service - tax - liability - Taxscan
The Supreme Court has issued notice to the Revenue in a matter related to the service tax liability arising from cross-border employee secondments during April 2008 to March 2013.
The appeal, filed by Tesco Bengaluru Private Limited, challenged the ruling of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Bangalore pronounced in February 2025.
The issue is about on whether the assignment of employees by overseas entities to the Indian affiliate during April 2008 to March 2013 is taxable as “Manpower Recruitment and Supply Agency Service”
The CESTAT’s Bangalore Bench, depending on the Supreme Court’s 2022 landmark ruling in Northern Operating Systems Pvt. Ltd., upheld the tax demand under reverse charge for the normal period of limitation, while striking down penalties and disallowing the extended limitation period.
Want a deeper insight into the Income Tax Bill, 2025? Click here
The Tribunal found that the secondment agreements mirrored the arrangements scrutinized in Northern Operating Systems, where secondees, though under the day-to-day control of the Indian entity, remained on the payrolls of the foreign employer, making the arrangement taxable as manpower supply.
However, the Tribunal provided relief by remanding the matter for recalculation limited to the standard limitation period and deleting all penalties, noting that payments for other services like ITSS and commercial training had been made with interest before show-cause notices .
The appellant appealed before the Supreme Court. Justices J.B. Pardiwala and K.V. Viswanathan condoned the delay in filing and refiling the appeal, and issued notice to the Revenue, returnable in four weeks.
The Court observed that “The Tribunal relying on the decision of this Court in the case of “CC, CENST Bangalore (Adjudication) vs. Northern Operating Systems Private Limited” Reported in 2022 (61) GSTL 129 (SC) held that the appellant – herein is obliged to discharge the service tax under the reverse burden mechanism for the services of receipt under the category of “Management Consultancy Services” “Manpower Recruitment and Supply Agency Service” during the relevant period.”
Accordingly, the bench condoned the delay and issued notice to the revenue returnable in four weeks.
Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates
