By TIOL News Service

MUMBAI, OCT 30, 2015: THE appellant is registered as provider of services in the category of manpower recruitment agency and also supply services to their overseas client. They organise recruitment of employees for overseas employment and charge an amount as a fee.

SCN was issued demanding ST on the said amounts. The adjudicating authority confirmed the ST demand and imposed penalties and interest.

We reported the Tribunal stay order as 2012-TIOL-1226-CESTAT-MUM.

The appeal was heard recently.

Before the CESTAT, the appellant submitted that undoubtedly the services rendered fall under the category of Manpower recruitment and supply agency but the demand is unsustainable for the reason that the appellant had recruited employees for their clients situated abroad. Inasmuch as since persons recruited are employees of the companies who are situated abroad and the employees/personnel work outside India, the services so rendered are export of services. Moreover, the confirmation of demand made under the category of BAS for the amounts of ticketing, emigration charges, commission on insurance policy and discount on advertisement, which amounts are incurred by the appellant on behalf of their clients and later on recovered and recorded as commission and which too would not be liable to service tax as they are in relation to export of services. Support is taken of the following decisions - Paul Merchants Ltd. - 2012-TIOL-1877-CESTAT-DEL, GAP International Sourcing (India) Private Limited -2014-TIOL-465-CESTAT-DEL, Microsoft Corporation (I) (P) Ltd. - 2014-TIOL-1964-CESTAT-DEL and SGS India Private Limited - 2014-TIOL-580-HC-MUM-ST.

The AR emphasized that the clients of the appellant would visit India and engage themselves in interacting with the persons short-listed and participate in the interviews, etc. in India, which would mean that the services rendered by the appellant were to be consumed in India and hence adjudicating authority was correct while confirming the demand raised.

After considering the submissions, the CESTAT observed -

7. In our considered view, the findings recorded by the adjudicating authority to confirm the demand of service tax under the category of "manpower recruitment and supply agency services" is incorrect inasmuch as, that the employees were recruited by the appellant for clients abroad for working, salaries are paid by the clients of appellant and the services of the appellant was engaged by the foreign clients for identifying the potential employees who can work abroad. It is to be seen that though the services of the appellant were for identifying, short listing and confirming the employment of the personnel in India, it was for working abroad and not in India. This would, in our considered opinion, would fall under the category of export of services. We find that on similar set of facts, Honourable High Court of Bombay in the case of SGS India had held in favour of the assessee…."

In the matter of the tax demand under BAS, the Bench held that the same ratio of SGS India would apply as the services are rendered by the appellant for recruitment of the personnel for the clients situated abroad.

Hold that in the facts and circumstances of this case, the impugned order is unsustainable, the same was set aside and the appeal was allowed.

(See 2015-TIOL-2331-CESTAT-MUM)