The Delhi Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that Supreme Court’s judgment in the case of Northern Operating Systems on secondment of employees does not apply where secondees are deputed by a Foreign Head Office to its Indian Project Office.
The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that the assessee was the service recipient of the overseas group company, which provided manpower supply service or a taxable service with regard to the employees it seconded to the assessee for the duration of the deputation or secondment.
The department has filed the appeal raising the issue whether the Adjudicating Authority has erred in dropping the demand pertaining to post-negative list period i.e. 1.7.2012 to 31.03.2015 in respect of “Manpower Supply Service” provided by Overseas Group Company to its group company in India or not?
The respondent/assessee, Oriental Consultant Company Ltd. is engaged in providing engineering and consultancy services (OC), Japan, entered into an agreement with various Indian parties for provision of services/project in India through temporary project offices opened as per the guidelines issued by RBI.
The assessee is one such Project Office of OC, Japan and is registered as a foreign company in India under the provisions of Section 592 of the Companies Act, 1956. The respondent being a Project Office incurs all expenditure for the purposes of execution of the Project and receives payment from the customers. Invoices are raised by the respondent on the customers as
per the terms of the agreement. The respondent discharges appropriate service tax liability on the amounts received from the customers. The books of accounts in India are maintained for ROC filing and tax purposes only and the expenses incurred in Japan for the Project offices in India are debited and credit of the same is given to the Head Office i.e. OC, Japan.
On the basis of an audit, show cause notice was issued for the period 20.10.2011 to 2013-14 raising the demand of service tax of Rs.4,33,78,130/- on the allegation that the respondent incurred foreign currency expenditure related to EXPATs and other administration related expenses with respect to import of service of manpower, which is taxable under the Reverse Charge Mechanism in the hands of the respondent. The case of the Revenue was that the Project Office /respondent and the Parent Office /OC, Japan are distinct persons as per Section 66A(2) of the Finance Act, 1994. The employees of OC, Japan are working for the respondent, which is a distinct person and hence there exist provision of service by one person to another.
The department relied on the decision of the Supreme Court in the case of M/s.Northern Operating Systems Pvt. Ltd., where the Apex Court was basically concerned, whether the secondment for the purpose of completion of the assesses‟s job amounts to manpower supply where the overseas group company entered into secondment agreement with its affiliates or local companies, such as the assessee for deploying the overseas companies employees for performing the task relating to the assesses activities. The Court considered the service agreement, secondment agreement between the overseas company and the assessee whereby the appellant was to request the overseas company to provide employees who have the expertise required by them and the overseas company agreed to second the employees to the appellant for the time period.
The tribunal while dismissing the department’s appeal held that the decision of the Apex Court in Northern Operating Systems is factually distinguishable and hence no reliance can be placed thereon.
Case Details
Case Title: Principal Commissioner of CGST & Central Excise, Delhi East Versus M/s.Oriental Consultant Company Ltd.
Case No.: Service Tax Appeal No.50432 of 2019
Date: 08/10/2025
Counsel For Petitioner: AR Shashank Yadav
Counsel For Respondent: Advocates Shagun Arora and Shri Kunal Agarwal
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