No Service tax on secondment of employees by group companies as employer-employee relationship exists

Last updated: 17 February 2021
Quick Summary
The CESTAT Bangalore has overturned a demand for substantial Service Tax on employee secondment between group companies. The tribunal ruled that when an employer-employee relationship is maintained, such secondment does not constitute 'manpower recruitment or supply agency' services. Therefore, Service Tax is not applicable on the reimbursements made.

Court :
CESTAT Bangalore

Brief :
The Hon'ble CESTAT Bangalore, in M/s Target Corporation India Pvt Ltd v. C.C.E., Bangalore [Service Tax Appeal No. 20459 of 2016 decided on January 19, 2021] set aside the order passed by the Commissioner for demand of differential Service tax amounting to INR 28,37,08,191/-, on secondment of the employees by the companies under agreement and held that such an activity cannot be termed as 'manpower recruitment or supply agency' where employee-employer relationship exists.

Citation :
Service Tax Appeal No. 20459 of 2016 decided on January 19, 2021

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