Bombay High Court grants temporary relief to Mercedes Benz, stays GST demand on expat salary payment

The Bombay High Court on February 7 granted temporary relief to the automobile company Mercedes Benz by temporarily staying the effect of an order demanding payment of Goods and Services Tax (GST) on expat salary payment [Mercedes Benz India Pvt Ltd v. Union of India & Ors].The order was passed after the company approached the Court against an order of the Additional Commissioner of Central GST and Customs demanding GST to the tune of approximately ₹10 crores on expat salary payment.A division bench of Justices GS Kulkarni and Firdosh Pooniwalla directed the CGST commissioner to file a reply to the petition and posted the matter for hearing on February 20. The Court also stayed the effect of the order under challenge until then.“At the request of the counsel for the authorities, stand over to February 20 to enable them to place on record reply affidavit. Till the next date of hearing, impugned order shall remain stayed,” the Court ordered..The company approached the High Court through Lumiere Law Partners claiming that the additional commissioner while passing the order under challenge, failed to follow the instructions issued by the Central Board of Indirect Taxes and Customs (CBIC) on December 13, 2023..In the communication of December 2023, CBIC had issued directions to all the Commissioners and Directors General of Central Tax to exercise caution before issuing tax evasion notices to Indian subsidiaries of multinational corporations on expat salary payment component..Senior advocate Darius Shroff for Mercedes argued that these instructions specifically asked the tax officials not to apply a 2022 verdict of the Supreme Court to every case of expat salary payment by the Indian subsidiaries of multinational companies..The Supreme Court had ruled in 2022 that the secondment (deputation) of employees by the overseas group company to its Indian subsidiary was a taxable service of 'manpower supply'. Because of this, not just service tax but even GST was applicable..Shroff argued that Mercedes had pleaded before the CGST Commissioner that the Supreme Court judgment would not apply to their case squarely and that the facts in their case have to be considered separately.However, since the official did not consider this submission and proceeded to pass the order under challenge, Mercedes approached the High Court seeking urgent relief..Mercedes was represented by Shroff along with advocates Prasad Paranjape, Kumar Harshwardhan and Dhruvi Shah.Advocates Jitendra Mishra and Ram Ochani appeared for the Department of Revenue of Finance Ministry.[Read Order]