M/S Bsh Houseshold Applicances Manufacturing PVT LTD. vs. Commissioner Of Central Tax

The petitioner is before this Court seeking for the following reliefs: "i) Grant a stay of the operation of the impugned order in original No.88/2024-25 (GST-JC) HC-KAR NC: 2025:KHC:26421 dated 02.02.2025 passed by the respondent No.2 enclosed at Annexure-A; iii) Pass such other orders in the facts and circumstance of the case."

The petitioner is engaged in the manufacturing and supply of home appliances having different units in Tamil Nadu, Maharashtra and Karnataka. During the period from July 2017 to June 2022, employees of the overseas group entity of the petitioner were deputed/seconded to each of the Karnataka unit, Maharashtra unit and Tamil Nadu unit, who were expatriate employees of the petitioners in terms of the Delegation Agreement dated 01.07.2011 entered into between the petitioner and its parent company- BSH Germany.

The seconded expatriates were on the payroll of the petitioner and operated under the complete control and supervision of the petitioner. They were paid a salary in terms of INR deposited into the bank account located in India, as well as in foreign currency deposited in a bank account in Germany. HC-KAR NC: 2025:KHC:26421 Suffice to say, both the components were part of the salary to be paid for the services to be rendered by them in India, and they were located in India.

On 19.05.2022, the Hon'ble Apex Court in the matter of C.C., CE AND ST., BANGALORE VS. M/S.NORTHERN OPERATING SYSTEMS PRIVATE LIMITED reported in 2022 (5) TMI 967, held that even when there was secondment of employees of foreign group companies to the Indian companies, the same would amount to a taxable service under the heading 'Manpower Supply Service', requiring service tax to be paid on such Manpower Supply Services being received by them.

The Judgment having been rendered on 19.05.2022, the petitioners immediately on 20.07.2022 made payments of IGST for all three 3 units, i.e. Karnataka, Maharashtra and Tamil Nadu, for the services availed from July 2017 to June 2022, and HC-KAR NC: 2025:KHC:26421 Form GSTR-3B was filed in July 2022. Consequently, FORM GST DRC-03 was also filed on 19.08.2022. 6. Upon such filing, proceedings were initiated against the three units separately. Against the Maharashtra unit vide show cause notice No.03/2022-23 dated 16.03.2023 claiming that the taxes from the date when the services were availed of service had not been paid and as such the petitioner was called upon to show cause as to why proceedings were not required to be initiated against the petitioner for recovery of interest and levy of penalty on the same.

Insofar as the Karnataka unit is concerned, a show cause notice bearing No.58/202-23 dated 03.03.2023 was issued on similar grounds, and insofar as the Tamil Nadu unit is concerned, a show cause notice bearing No.02/2023-GST dated 27.03.2023 was also issued on similar grounds.

The petitioner, though, supplied his written reply to the said show cause notices, and an opportunity of HC-KAR NC: 2025:KHC:26421 hearing was granted when the petitioner sought to contend that it is only from the date of judgment of the Hon'ble Apex Court that the liability arose. The judgment being dated 19.05.2022, the payment in respect thereto having been discharged on 19.08.2022, the same is within time and there is no delay as such caused by the petitioner, and no interest and penalty is required to be paid.

This contention was rejected by the original authority and the impugned order in Original No.88/2024-25 (GST-JC) dated 02.02.2025 at Annexure-A came to be passed by Respondent No.

The petitioner is challenging the same before this court.

The submission of Sri Ravi Raghavan, learned counsel appearing for the petitioner, is that prior to the judgment of the Hon'ble Apex Court in Northern Operating Systems case, there was no liability on an Indian company to which an expatriate had been seconded to make payment of service tax. It is only HC-KAR NC: 2025:KHC:26421 after the said judgment on 19.05.2022 that the requirement to make payment of service tax under the Head Manpower Supply Service came into being, and in that background, he submits that the tax in relation thereto has been discharged on 19.08.2022. The question of non-payment of service tax from the date on which the services were availed till the date of payment and the interest and penalty thereon would not arise. On that ground, he submits that this aspect has not been taken into account, though brought to the notice of Respondent No.1 during the course of the hearing, the order in the original suffers from the above illegality and is required to be quashed.

The submission of Sri Jeevan J Neeralgi, learned counsel for the Respondents, is that the services which were availed of by the petitioner by way of secondment of employees would come within the heading 'Manpower Supply Services'. It is on account HC-KAR NC: 2025:KHC:26421 of the dispute raised by the petitioners that the petitioners did not make payment of such amounts. The various tribunals having held in favour of the assessee, it is the Hon'ble Apex Court, vide judgment dated 19.05.2022, in Northern Operating Systems Private Limited case, which concluded the issue by holding that secondment services are taxable services under the heading ‘Manpower Supply Service' and service tax and consequently GST would be liable to be paid thereon. He therefore submits that the aspect of liability to make payment of tax being known to the petitioner from the date on which the imposition was made and the services having been availed subsequent thereto, it was required by the petitioner to make payment of the service taxes thereon not having paid the same, the 1st Respondent has held that Section 74 of the GST Act, 2017 would be applicable and levied both interest and penalty which cannot be found fault with. HC-KAR NC: 2025:KHC:26421

Heard Sri Ravi Raghavan, learned counsel for the petitioner and Sri Jeevan J Neeralgi, learned counsel for the respondents. Perused papers.

The short question that would arise for consideration in the present matter is whether an assessee who challenges the applicability of a particular provision and the exigibility of a particular transaction to tax and succeeds in such challenge before the Tribunal, but the order is reversed by the Hon'ble Apex Court, would be required to pay interest and penalty in terms of Section 74 of the Goods and Service Tax Act, 2017?

It is not in dispute that the petitioner has availed the services by way of secondment of employees, which the petitioner has disclosed in his books of accounts and to the knowledge of the respondent authorities. It is only the interpretation given to the exigibility of tax, thereto, which gave rise to a dispute which went on up to the Hon'ble Apex Court. The assessee HC-KAR NC: 2025:KHC:26421 contending that it is not exigible whereas the Revenue contending that it was exigible. The Tribunals having passed orders in favour of the assessee, the Hon'ble Apex Court, reversed the said finding and held that the secondment of employees is exigible to service tax. On such finding being delivered, the assessee paid the applicable tax.

In that background, it cannot be said that the petitioner has wrongly availed or utilized by reason of fraud or on the basis of any wilful statement or suppression of facts and or has evaded tax. All the facts being presented to the authorities. It is only the interpretation which was in question and initially the interpretation was held in favour of the assessee, subsequently against the assessee and the concerned, I am of the opinion that the basic requirement of Section 74 that there is evasion of tax on a wilful misstatement or suppression would not be attracted. In that background, no penalty HC-KAR NC: 2025:KHC:26421 could be levied on the services availed of by the petitioner in terms of Section 74 of the CGST Act, 2017. However, the petitioner would be liable to make payment of interest on the belated payment of tax from the date of availment of service as may be factually required to be determined by respondent no. 1. 16. In that view of the matter, I pass the following ORDER i. The petition is partly allowed. ii. A certiorari is issued the impugned order in Original No.88/2024-25 (GST-JC) 02.02.2025 passed by respondent No. 2 at Annexure-A is set aside. iii. The matter is remitted to Respondent No.2 for fresh consideration in terms of the above observations. iv. The petitioner would also be eligible for availing of any amnesty scheme provided HC-KAR NC: 2025:KHC:26421 under Section 128A of the CGST Act, 2017. (SURAJ GOVINDARAJ) JUDGE