Custom, Excise & Service Tax Tribunal
Bharathi Cement Corporation Private ... vs Guntur - G S T on 9 March, 2026
1 Appeal No. ST/30525/2018
CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
HYDERABAD
REGIONAL BENCH - COURT NO. - I
Service Tax Appeal No. 30525 of 2018
(Arising out of Order-in-Appeal No.GUN-EXCUS-000-APP-172-17-18 dated 28.03.2018
passed by Commissioner of Central Tax & Customs (Appeals), Guntur)
M/s Bharathi Cement Corporation .. APPELLANT
Pvt Ltd.,
Nallalingayapalli,
Kamalapuram,
YSR District,
Andhra Pradesh - 516 309.
VERSUS
Commissioner of Central Tax .. RESPONDENT
Guntur - GST
C.R. Buildings,
Kannavarithota,
Guntur,
Andhra Pradesh - 522 004.
APPEARANCE:
Shri Ch. Sumanth, Advocate for the Appellant.
Shri M. Anukathir Surya, Authorized Representative for the Respondent.
CORAM: HON'BLE Mr. A.K. JYOTISHI, MEMBER (TECHNICAL)
HON'BLE Mr. ANGAD PRASAD, MEMBER (JUDICIAL)
FINAL ORDER No. A/30138/2026
Date of Hearing: 10.11.2025
Date of Decision: 09.03.2026
[ORDER PER: ANGAD PRASAD]
M/s Bharathi Cements Corporation Pvt Ltd., (hereinafter referred to as
the appellant) has filed the present appeal against Order-in-Appeal No. GUN-
EXCUS-000-APP-172-17-18 dated 28.03.2018 passed by the Commissioner
(Appeals), whereby, Order-in-Original No.VIZ-EXCUS-003-ADC-53-16-17
dated 28.12.2016 has been upheld.
2. The fact, in brief, is that the appellant entered into an agreement
dated 08.12.2012 with M/s VICAT S.A., France, for receiving advice and
assistance in relation to business strategies, data collection, analysis,
2 Appeal No. ST/30525/2018
research, training, development, management and certain other allied areas.
The appellant discharges applicable Service Tax under Reverse Charge
Mechanism (RCM) under the category of 'Management Consultancy Service'
in respect of the aforesaid services and avails Cenvat Credit thereof. Apart
from the Management Consultancy Services, Department noted that certain
employees of M/s VICAT S.A. have been deputed to India, for work under
the control, direction and supervision of the appellant. The appellant has
entered into individual employment agreements with such expats. A part of
salary component is paid by the appellant into the bank account of the
expats and balance salary, including the statutory contributions payable in
France, is paid by the appellant to M/s VICAT S.A., who in turn remits the
same to the bank accounts of the employees in France.
3. The appellant was subjected to Excise Audit during the course of
which an objection was raised alleging non-payment of Service Tax on the
salary re-imbursements made in respect of expatriate employees and paid to
M/s VICAT S.A. The appellant, vide letter dated 04.12.2013, clarified that the
services rendered by the expats were in their personal capacity and not on
behalf of the foreign company and that M/s VICAT S.A. had no role in the
working, supervision or terms and conditions of employment entered
between the appellant and the expatriate employee. Notwithstanding the
same, a Show Cause Notice dated 12.04.2016 was issued proposing demand
of Service Tax on the salary reimbursements of the expats paid to M/s VICAT
S.A. for the period December, 2010 to June, 2013. The appellant filed its
reply to Show Cause Notice and attended the personal hearing, after due
process the Learned Adjudicating Authority passed the following order:
3 Appeal No. ST/30525/2018
ORDER
1) I hold that out of total demand of Rs. 66,93,771/- made in the SCN, the assessee is liable to pay Service Tax (including Cesses) of Rs. 53,55,642/- as receiver of Service in respect of taxable Services received by them during the period from December 2010 to June 2013 and I order for recovery of Rs. 53,55,642/- (Rupees Fifty Three Lakhs Fifty Five Thousand Six Hundred and Forty Two Only) from M/s Bharathi Cement Corporation Pvt Ltd., under Section 73(2) read with proviso to section 73(1) of the Finance Act 1994 along with interest at applicable rates under Section 75 of the Finance Act, 1994.
2) I order for appropriation of Rs. 18,57,880/- paid by the assessee towards the liability mentioned at (1) above.
3) I order for appropriation of Rs. 3,59,340/- paid by the assessee towards interest liability mentioned at (1) above.
4) I impose penalty of Rs. 53,55,642/- on M/s Bharathi Cement Corporation Pvt Ltd., under Section 78 of the Finance Act, 1994.
4. The appellant filed an appeal before Commissioner (Appeals), against OIO dated 28.12.2016. However, the Learned Commissioner (Appeals), vide impugned order upheld the order passed by Adjudicating Authority and rejected the appeal filed by the appellant.
5. Therefore, being aggrieved by the impugned order, the appellant has filed present appeal before the Tribunal.
6. Learned Counsel for the appellant submits that the appellant pays a part of the salary directly to the expats in India. Only the statutory social security contributions in France and certain other emoluments are paid by the appellant to M/s VICAT S.A., which in turn, deposits the said amount into the respective French bank account of the employee. It is further submitted that the appellant files Indian Income Tax Returns for the expatriates on their global salary. Thus the entire remuneration is borne and paid by the appellant.
7. Learned Counsel for the appellant further submits that the appellant is the actual employer of expatriates and that M/s VICAT S.A. does not render 4 Appeal No. ST/30525/2018 any service, it merely facilitates disbursement of salary. Therefore, the reimbursement made to M/s VICAT S.A. not be treated consideration for any taxable service.
8. It is further submitted that no secondment agreement exists between the appellant and the foreign entity; therefore, the judgment of Hon'ble Supreme Court in the case of Commissioner of Central Excise, Customs and Service Tax, Bangalore (Adjudication) Vs Northern Operating System Pvt Ltd., [2022 (5) TMI 967 (SC)] is not applicable. In the instant case, the appellant entered into direct with the employees in their personal capacity, in contrast, in the case of Northern Operating System, supra, there existed a secondment agreement, the overseas employee where temporarily loaned to the Indian entity. In the present case M/s VICAT S.A. is not deploying personal under any service contract. Therefore, the Northern Operating system ruling is not applicable to the facts of the present case.
9. Learned Counsel for the appellant also submits that the control, supervision and responsibilities vest entirely like with the appellant in the respect of employees. The absence of any control or supervisory role by the foreign entity further, establishes that no service is being provided by the foreign entity to the appellant.
10. Learned Counsel for the appellant further submits that the expats deployed in India do not undertake any specific tasks which result in the supply of services by the foreign entity. The expatriate employees occupy positions exclusively related to the appellant business operation in India and do not contribute in any manner to the business activities of the foreign entity.
5 Appeal No. ST/30525/2018
11. Learned Counsel for the appellant also submits that decision of the Hon'ble Supreme Court in Northern Operating System does not lay down blanket principle that all secondment arrangements amount to provision of 'Manpower Recruitment and Supply Agency Service'. The determination of taxability depends upon the specific facts and circumstances of the each case. This position has been clarified by the Central Board of Indirect Taxes and Customs (CBIC) in Instruction No.05/2023-GST dated 13.12.2023.
12. The relevant extract of the said instruction read as under:
"2.3 It may be relevant to note that there may be multiple types of arrangements in relation to secondment of employees of overseas group company in the India entity. In each arrangement, the tax implications may be different, depending upon the specific nature of the contract and other terms and conditions attached to it. Therefore, the decision of the Hon'ble Supreme Court in the NOS judgment should not be applied mechanically in all the cases. Investigation in each case requires a careful consideration of its distinct factual matrix, including the terms of contract between overseas company and Indian entity, to determine taxability or its extent under GST and applicability of the principles laid down by the Hon'ble Supreme Court's judgment in NOS case."
13. Learned Counsel for the appellant submits that the activities carried out by the expats cannot be classified as 'Management or Business Consultant Service'. It is submitted that the scope of 'Management Consultant Service' as defined by Section 65(105)(r) and Section 65(65) of the Finance Act is limited to provision of advice, consultancy or technical assistance. In the instant case the expats were engaged in executive and operational roles which go for beyond the functions of a management consultant and were performed in the course of their employment with appellant. In this regard, Learned Counsel for the appellant reliance is placed on the following decisions:
(i) Basti Sugar Mills Co. Ltd., Vs Commissioner of Central Excise, Allahabad, [2007 (4) TMI 25 (Tri-Delhi), Maintained in 2007 (11) TMI 548] 6 Appeal No. ST/30525/2018
(ii) M/s Nirulas Corner House Pvt Ltd., Vs Commissioner of Service Tax, New Delhi [2008 (12) TMI 57 (Tri-Delhi)]
(iii) BSR. & Co. Vs Commissioner of Service Tax, Gurgaon [2014 (8) TMI 227 (Tri-Delhi)]
14. Learned Counsel for the appellant further submits that the issue of inclusion of reimbursable expenditure in the taxable value is no longer res- integra in view of the judgment of the Hon'ble Supreme Court in Union of India Vs Intercontinental Consultants and Technocrats Pvt Ltd., [2018 (10) GSTL 401 (SC)]. The Supreme Court held that Rule 5 of the Service Tax (Determination of Value) Rules, 2006 was ultra vires of the Finance Act, as it sought to include reimbursable expenses in the value of taxable services without statutory backing. It is further submitted that though Section 67 of the Finance Act, 1994 subsequently amended with effect from 14.05.2015 to include reimbursable expenses within scope of the taxable value such amendment in prospective in nature. Learned Counsel for the appellant reliance on the following decisions:
(i) ADP Private Ltd., Vs Commissioner of Central Tax, [2025 (2) TMI 1163d (Tri-Hyd)]
(ii) Commissioner of Central Tax, Tirupati Vs PCR Warehousing Pvt Ltd., [2025 (1) TMI 1440 (Tri-Hyd)]
(iii) Central Industrial Security Force Vs Commissioner of Central Tax, Visakhapatnam [2024 (5) TMI 565 (Tri-Hyd)]
(iv) Bhayana Builders Vs CSR, [2013 (9) TMI 294 (Tri-Delhi-Larger Bench), Affirmed by the Supreme Court in 2018 (2) TMI 1325]
15. Learned Counsel for the appellant submits that there is no element of suppression of facts as alleged in the Show Cause Notice. It is submitted the Department issued an audit memo on 13.11.2013 to which the appellant duly submitted a details reply on 04.12.2013 explaining the nature of 7 Appeal No. ST/30525/2018 agreements entered into with the expats and clarifying that no service was being received from M/s VICAT.
16. It is submitted that being in possession of complete fact the Department issued a letter dated 05.01.2016 after a lapse of merely 25 months for additional information. Thereafter, issued the Show Cause Notice dated 18.04.2016. Once the Department was fully aware of the factual position, it cannot be alleging suppression the facts so as to invoke the extended period of limitation.
17. Learned Counsel for the appellant further submitted that in the case of Northern Operating System Pvt Ltd, supra, the Hon'ble Supreme Court dropped the demand for the period beyond the normal limitation period. Following the said judgment, various benches of the Tribunal have consistently set aside the demand of Service Tax raised for the extended period of limitation. Learned Counsel for the appellant relied on the following judgments:
(i) Delphi Automotive Systems Pvt Ltd., Vs Commissioner of Service Tax [2025 (7) TMI 1137 (Tri-Chandigarh)]
(ii) Commissioner of Central Tax, North Commissionerate, Bangalore Vs M/s Fuji Furukawa Engineering and Construction Co., [2024 (5) TMI 372 (Tri-Bang)]
(iii) Daimler India Commercial Vehicles Pvt Ltd., Vs The Commissioner of CGST & Central Excise [2025 (7) TMI 148 (Tri-Chennai)]
(iv) M/s Dell International Services India Pvt Ltd., Vs Commissioner of Central Excise and Customs [2023 (2) TMI 183 (Tri-Bang)]
(v) Tesco Bengaluru Pvt Ltd., Vs Commissioner of Central Excise and Service Tax [2025 (2) TMI 1054 (Tri-Bang)]
(vi) M/s Halcrow Consulting India Pvt Ltd., Vs Commissioner of Service Tax [2024 (5) TMI 130 (Tri-New Delhi)]
(vii) M/s AGS Customer Services (India) Pvt Ltd., Vs Commissioner of Service Tax-I [2014 (6) TMI 1113 (Tri-Mum)]
(viii) M/s KSPG Automotive India Pvt Ltd., Vs Commissioner of Service Tax-I [2024 (4) TMI 682 (Tri-Mum)] 8 Appeal No. ST/30525/2018
(ix) M/s Renault Nissan Automotive India Pvt Ltd., Vs The Commissioner of G.S.T. and Central Excise [2023 (7) TMI 635 (Tri-Chennai)]
18. Learned Counsel for the appellant further submits that where the disputes involved interpretation of statuary provisions and the assessee had acted in accordance with prevailing judicial decisions, invocations extended period of limitation is not justified.
19. Per contra, Learned Authorized Representative for the Revenue submits that the appointment letters of Mr. Darondeau Herve dated July 20, 2010 and Mr. Olivier Lilian Thomas dated October 1, 2011, preceded the employment agreement dated January 1, 2012. It is submitted that these appointment letters were issued on a common letterhead and were countersigned by M/s VICAT S.A. The appellant entered into employment agreements with the personnel through M/s VICAT S.A., which is the holding company of the personnel and such arrangement were aligned with the terms of the appellant.
20. The Learned AR further submits that the appointment letters are not stand alone agreements between the appellant and the employees of M/s VICAT S.A. It is contended that these appointment letters were issued only to the employee of M/s VICAT S.A. The amounts reimbursed to M/s VICAT S.A. were not determined by the appellant and therefore, cannot be equated with the salary paid by the appellant to the employees. It is submitted that M/s VICAT S.A. was under a contractual obligation to pay emoluments to the expatriate employees and the said amounts reimbursed by the appellant. Accordingly, the appellant was receiving services from M/s VICAT S.A.
21. Learned AR further submits that the amounts on which Service Tax was demanded were exclusive of salary paid by the appellant to the 9 Appeal No. ST/30525/2018 expatriate employees. In this regard Learned AR relied on the judgment of Hon'ble Supreme Court in the case of Bangalore (Adjudication) ETC Vs M/s Northern Operating System Pvt Ltd., [2022 (5) TMI 967].
22. Learned AR further submits that the appellant did not directly entered into an agreement with foreign personnel but engaged them through its holding company. It is contended that part of the salary along with certain charges was paid to the holding company, which clearly establishes that the arrangement was not pure employer - employee relationship but involved provisions of services by the foreign entity.
23. Learned AR submits that the amount paid to the foreign entity M/s VICAT S.A. cannot be artificially bifurcated and termed as reimbursable expenditure. It is submitted that the agreement, were on a fixed consideration basis, whereby, the appellant had agreed to pay a fixed fee not exceeding entered into Euros 6,00,000 annually. Therefore, the appellant's act of splitting of the gross amount paid to M/s VICAT S.A. into two components namely payment to the company and payments to the employees of the company is not legally sustainable.
24. In support of above contention, Learned AR relied on CESTAT, Chennai decision in the case of Commissioner of GST & Central Excise, Chennai Vs M/s Chemplast Sanmar Ltd., [2023 (7) TMI 482] wherein, held that the services provided by the employee to the employer in the course of employment are outside the ambit of services. Whereas, services provided outside the employer - employee relationship for consideration would be eligible of tax.
25. Learned AR also placed reliance of the Larger Bench of the CESTAT Bangalore in the case of Bhagavathy Traders Vs Commissioner of Central 10 Appeal No. ST/30525/2018 Excise, Cochin [2011 (8) TMI 430] wherein, it was held that where the service recipient legal or contractual obligation to pay certain amounts to a third party and such amounts are paid by the service provider on behalf of the service recipient, the question of reimbursement of expenses incurred on behalf of the recipient arises. It was further held that there is no justification or legal authority to artificially split the cost towards provision of services.
26. Learned AR further places reliance on the decision in the case of Commissioner of Central Excise and Service Tax, Surat Vs Jalaram Security Services [2019 (10) TMI 1207] in support of the contention that reimbursable expenses forms part of the taxable value when such expenses are intrinsically linked to the provision of taxable services.
27. Heard Learned Counsel for the appellant Shri Ch. Sumanth and Learned Representative of the Department Shri M. Anukathir Surya and perused the records and the written as well as oral submissions made by both sides.
28. We find that in this case, the Adjudicating Authority has examined the appointment letter issued to one of the two employees namely Mr. Olivier Lilian Thomas and has made certain observations as regards certain terms and conditions. It has been also observed that the appellant has paid the demanded amount to the tune of Rs. 18,57,880/-. Thereafter, he made an observation that while in respect of certain bills he has already paid the service tax, however, in respect of a few bills, he has not agreed to pay on the grounds that these are paid to their employees and there exist employer employee relationship. In so far as the agreement with VICAT S.A., he was acting as pure agent who was transacting certain money in respect of those employees and were getting re-imbursement by appellant and this re- 11 Appeal No. ST/30525/2018 imbursement cannot be treated as consideration. It was also held that for the period prior to 01.07.2012, the activity squarely falls under the category of Management Consultancy Services, whereas, after 01.07.2012, there is no requirement for any classification of service as the activity involved itself is a taxable service and not covered by Negative List or exemption.
29. Therefore, the first issue which needs to be decided is whether in the given facts of the case, there exists any employer employee relationship between two persons, whose appointment letters have been examined, and the appellant. While the Adjudicating Authority has held that these are not stand-alone agreements and these appointment letters were issued to them as an employee of VICAT S.A. where even the amount re-imbursed to the VICAT S.A. are not determined by the appellant. We find that the main plank of submission by the Learned Advocate is that they are employees of the appellant and hence they would not be covered under the category of management consultancy service for the period prior to 01.07.2012 or will be exempted, being in the nature of employer employee relationship. His another ground is that reliance of the Department of the Hon'ble Supreme Court judgment in the case of CCE & ST, Bangalore Vs Northern Operating System Pvt Ltd., [2022 (5) TMI 967 (SC)] is not applicable to the facts of the present case. He has also relied on the fact that the CBIC vide it's instruction no. 05/2023-GST dated 13.12.2023 clarified that the judgment in the case of Northern Operating System Ltd., cannot be applied mechanically to all secondment cases. He is also submitting that the amount re-imbursed by the appellant to VICATSA is in the nature of re-imbursement of part salary paid by them to the employee in foreign country and as such re-imbursable expenditure are not taxable in view of judgment of the Hon'ble Supreme Court in the case of Union of India Vs Intercontinental and Technocrats Pvt 12 Appeal No. ST/30525/2018 Ltd., [2018 (10) GSTL 401 (SC)]. He is also submitting that in the facts of the case, extended period of limitation cannot be relied upon and that the matter is revenue neutral in as much as whatever service tax is paid will be available as credit.
30. Therefore, the first and foremost issue we decide is whether the judgement of Northern Operating System Pvt Ltd., supra, is applicable to the present case or otherwise. We find that the judgment of Hon'ble Supreme Court was given in a particular set of facts and cannot be mechanically applied to all cases. The distinguishing factors between the case of Norther Operating System Pvt Ltd., supra, and the present appeal are summarized as under:
Aspect Northern Operating Present Case
Business Model of Indian entity executes Indian entity operates
Indian entity contracts secured by foreign independently and is
entity for the provision of engaged in the
specialized services such as manufacture of cement
back-office operations, IT and clinker; expats
support, banking-related manage Indian operations
services, etc. (para 52)
Correlation Employment of seconded Employment agreements
between service personnel was aligned with are independent of
agreement and service delivery to foreign service agreement; no
employment entity (para 52) linkage to foreign entity's
agreements business
Secondment Formal secondment agreement No secondment
Agreement post service agreement (para agreement. Even the
31, 32) management consultancy
argument makes no
mention of secondment
Chronology of Secondment follows service Few employment
Agreements agreement. Employment agreements predate
agreements follow secondment management consultancy
agreement (para 31, 32) agreement
Nature of Structured service Direct employment
agreements with arrangement agreements with expats
employees (para 32)
Purpose of To fulfill service contracts of To manage and operate
Secondment/ foreign entity (para 52) Indian business; no
Deployment service to foreign entity
Control & Foreign entity retained Full control and
13 Appeal No. ST/30525/2018
Supervision obligations over employee supervision by Appellant
conduct (para 32)
Nature of Work Employees performed tasks Employees work solely for
Performed benefiting foreign entity Appellant's Indian
operations
Payroll Structure Salaries entirely paid by Appellant pays part of
foreign entity; Indian entity salary directly; statutory
reimbursed (para 49, 53) contributions and other
emoluments paid to Vicat
Income Tax Filing No mention of Indian tax filing Appellant files Indian
by Indian entity income tax returns on
global salary
Salary Foreign currency (para 54) Both Indian Rupees and
Denomination Foreign currency
Global Repatriation of the employees No such policy exists
Repatriation will be in accordance with this
Policy policy (para 49)
31. We also find that it is not in dispute that the appellants have been paying applicable service tax in respect of management consultancy services provided by VICAT S.A. We also note that some of these employment agreements/letters were entered well before the management consultancy agreement, which would support the submission that the employment of executive members was not pursuant to any service arrangement with any foreign entity but due to certain independent partial needs. Moreover, in the case of Northern Operating System Pvt Ltd., supra, it has been specifically observed that the nature of service will be that of service of manpower supply. Whereas, in this case, the proposal itself has been made under the Management Business Consultancy Service.Therefore, this case cannot be decided based on the observation and decision of the judgment of Hon'ble Supreme Court in the case of Northern Operating System Pvt Ltd., supra.
32. We find that in support of the fact that they were employee of the appellant, they have taken into account certain relevant factors including the fact that there is no independent secondment agreement between the appellant and VICAT S.A. for these two personnel. In this case also there is 14 Appeal No. ST/30525/2018 nothing on record to suggest that all control, supervision and responsibility vis-à-vis these employees lie with the appellant and there is no control or supervisory role by foreign entity. Moreover, the so called seconded employees were actually performing the job for foreign entity and are performing the jobs which are exclusively concerned with the appellant's business operations in India. Further, ongoing through the definition of Management or Business Consultancy Service, the scope covers only consultancy and technical assistance, whereas, on perusal of record and submissions these expats have played roles which are much beyond the roles of any such management consultant and therefore it is in the course of their employment. We find that in the case of M/s Nirulas Corner House Pvt Ltd., Vs Commissioner of Service Tax, New Delhi [2008 (12) TMI 57 (Tri- Del)], wherein, the similar service i.e. Management Consultancy Service was the issue, the Tribunal, interalia, observed that the role of a consultant is to render advice consultancy and technical assistance in relation to matter on which he has expertise, however, the decision or otherwise is left to the management and the consultant does not have right to impose his advice. In the present factual matrix, these two employees have been performing activities much beyond the scope of Business Consultancy Service and therefore cannot be treated as an advisor or consultant to the appellant. On the issue, whether they can be treated as employee, especially when a part of their remuneration is being paid by VICAT S.A. and which is also meeting certain statutory payment, which is further re-imbursed by the appellant on receipt of invoice from VICAT S.A., we feel that there is an understanding with VICAT S.A. to pay certain amount in respect of certain invoices which will be re-imbursed by them. It is also a fact that the deductions under Income Tax Act i.e. TDS was being made in India on the total ekmployment including the amount being paid by VICAT S.A. which has been re-imbursed 15 Appeal No. ST/30525/2018 by the appellant. In other words, the salary inclusive of the amount paid indirectly through VIVAT S.A. was treated as salary under the Indian Income Tax Act.
33. Therefore, in the facts of the case and especially in the absence of any specific secondment agreement, we find that the relationship is that of employer employee and therefore no service tax is leviable post 01.07.2012. For the period prior to 01.07.2012, these activities would still be in the realm of self service and could not be covered within the category of Business Support Service or Business Auxiliary Service hence not leviable to service tax. We also hold that the judgment of Northern Operating System Pvt Ltd., supra, is not applicable in the facts of the case and material available on record. Since, we have decided the issue on merit, we have not taken up the issue of limitation.
34. Appeal allowed.
(Pronounced in the open court on__09.03.2026__) (A.K. JYOTISHI) MEMBER (TECHNICAL) (ANGAD PRASAD) MEMBER (JUDICIAL) Shirisha