Supreme Court Issues Notice in Tesco Bengaluru Service Tax Dispute on Employee Secondment.


22 September 2025 Service Tax >> Tax Laws  

The Supreme Court of India has consented to hear a matter related to the taxability of employees deputed by foreign bodies to Tesco Bengaluru Private Limited between April 2008 and March 2013. The issue is concerned with an appeal by Tesco against the order of Customs, Excise and Service Tax Appellate Tribunal (CESTAT), South Zonal Bench, Bengaluru, dated February 21, 2025.

The appeal revolves around two issues that were under consideration by the Tribunal:
  • Whether the deputation or secondment of staff by related foreign organizations to Tesco could be taxed as "Manpower Recruitment and Supply Agency Service" till June 2012, and as a "service" supplied under the negative list regime from July 1, 2012 onwards.
  • Whether the extended time period for limitation could be resorted to by the Revenue to collect tax for the said period.
 
 
 
 
 
 

The Tribunal based its decision on the Supreme Court's seminal ruling in Commissioner of Customs, Central Excise and Service Tax, Bangalore (Adjudication) v. Northern Operating Systems Pvt. Ltd. (2022), and held that Tesco had to pay service tax on the reverse charge mechanism. The services were "Management Consultancy Services" or "Manpower Supply Services" during the material period. But on the issue of limitation, the Tribunal judged in favour of the company and dismissed the Revenue's invocation of the extended period.

In the preliminary hearing, a Bench of Justice J.B. Pardiwala and Justice K.V. Viswanathan condoned the delay in filling and refilling the appeal. The Court has now issued notice to the Revenue, returnable in four weeks, and also allowed dasti service (personal service of notice) in addition.

This case is set to test further the extent of the Northern Operating Systems case law, specifically in connection with multinational enterprises engaged in India that are based on employee secondments from group entities outside of India.