Service Tax applicable on secondment of employees between group companies: SC

Supreme Court in C.C.,C.E. & S.T. – Bangalore vs. M/S Northern Operating Systems C.A. No. 2289-2293/2021, while examining an issue in relation to the levy of service tax on secondment of employees by the foreigngroup company tothe Indian entity wherein the salary is disbursed by the foreign company and the same is later reimbursed by the Indian entity at actuals, observed that the courts do not give primacy to any single determinative factor in order to decide whether an arrangement is a ‘contract of service’ or a ‘contract for service’ and the courts have consistently applied one test: substance over form, requiring a close look at the terms of the contract or the agreements. The Supreme Court placed reliance on the documents furnished by the Indian entity, deduced that while the seconded employee, for the duration of secondment, is under the control of the Indian entity and works under its direction, the fact remains that they are on the payrolls of their foreign employer and the secondment is a part of the global policy of the overseas employer loaning their services on a temporary basis and on the cessation of the secondment period, they must be repatriated in accordance with a global policy and thus observed that Indian entity was the service recipient for service (of manpower recruitment and supply services) by the overseas entity, in regard to the employees it seconded to the Indian entity, for the duration of their deputation or secondment.