Executive Appointed by Foreign / Holding Company is not Manpower Recruitment or Supply Agency Service: CESTAT [Read Order]

The Bangalore bench of Customs, Excise & Service Tax Appellate Tribunal has held that executive appointed by foreign/holding company is not Manpower Recruitment or Supply Agency Service.

The appellant, Honey Well Technology Solutions Lab Private Limited is wholly owned subsidiary of Honeywell International Inc. (HII). The appellant is engaged in the business of development and export of Software and Information Technology enabled support service and other auxiliary and support services to HII in the field of Aerospace, Automation and Control Solutions, New Product Development, IT Service and Solutions in terms of an Assignment Agreement.

The appellant and HII with an objective to secure the services of managerial and technical personnel to assist the appellant in its business entered into an agreement. As per the agreement, the appellant has agreed to reimburse HII inter alia all remuneration of the employees including but not limited to salary, bonuses and social benefits of the employees paid by HII and all out-of-pocket expenses incurred by the seconded employees paid by HII including business travel expenses and other miscellaneous expenses, directly related to the secondment of the employee. The appellant also deducted TDS on account of salary paid and remitted the same to the exchequer of the Indian Government under personal income tax. The adjudicating authority considered the said arrangement as Manpower Recruitment or Supply Agency Service and accordingly, confirmed service tax. Therefore, the appellant filed appeal before the Tribunal.

The counsel for the appellant, Sri Syed Peeran submitted that, the demand on Manpower Recruitment or Supply Agency Service, this Tribunal in the appellant’s own case Honeywell Technology Solutions Lub Pvt. Ltd. Vs. Commissioner of Service Tax, Bangalore [2020-TIOL-1277-CESTAT-BANG] has dropped the demand for the earlier period. The facts in that case and the present case, is similar except difference of period. Therefore, the issue is no longer res integra.

The Coram of Sri Ramesh Nair, Judicial Member and Sri P Anjani Kumar, Technical Member, has held that “in the appellant’s own case, this Tribunal holds that arrangement for availing the services of executive appointed in the appellant’s company by the foreign vendor does not amount to Manpower Recruitment or Supply Agency Service. Accordingly, the demand under Manpower Recruitment or Supply Agency Service is not sustainable and hence, the same is set aside”

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