Bombay High Court Grants Temporary Relief to Mercedes Benz in Expat Salary GST Dispute

Bombay High Court Grants Temporary Relief to Mercedes Benz in Expat Salary GST Dispute

The Bombay High Court offered a temporary lifeline to Mercedes Benz India on February 7 by staying an order demanding payment of Goods and Services Tax (GST) on expat salary payments. The order was issued in the case of Mercedes Benz India Pvt Ltd v. Union of India & Ors.

The Bombay High Court granted Mercedes Benz India a temporary reprieve after it was approached in an ongoing dispute with the GST authorities who demanded payment of approximately ₹10 crore by the Additional Commissioner of Central GST and Customs.

Justices GS Kulkarni and Firdosh Pooniwalla, sitting on a division bench, directed the CGST commissioner to file a reply to the petition by February 20, when the matter will be heard again. The order demanding the ₹10 crore payment remains on hold until the next hearing.

The Court directed that, upon the request of the authorities’ counsel, the matter be adjourned to February 2. This extension will allow them to submit their reply affidavit. Until the next date of hearing, the challenged order will remain stayed.

Mercedes Benz India challenged the ₹10 crore GST demand in the High Court through Lumiere Law Partners. They argue that the Additional Commissioner disregarded the Central Board of Indirect Taxes and Customs (CBIC) instructions issued on December 13, 2023, when passing the contested order.

In the December 2023 communication, CBIC directed Commissioners and Directors General of Central Tax to cautiously issue tax evasion notices to Indian subsidiaries of multinational corporations regarding expat salary payments.

Senior advocate Darius Shroff, representing Mercedes, argued that the instructions explicitly directed tax officials not to automatically apply the 2022 Supreme Court verdict to all cases involving expat salary payments by Indian subsidiaries of multinational companies.

The 2022 Supreme Court ruling deemed the secondment of employees by an overseas group company to its Indian subsidiary as a taxable "manpower supply" service. Consequently, both service tax and GST became applicable.

Shroff maintained that Mercedes previously argued before the CGST Commissioner that the Supreme Court judgment was not directly applicable to their case and the specific facts required separate consideration.

Unsatisfied with the CGST Commissioner's disregard for their arguments, Mercedes approached the High Court seeking urgent relief.

Mercedes was represented by Shroff alongside advocates Prasad Paranjape, Kumar Harshwardhan, and Dhruvi Shah. Advocates Jitendra Mishra and Ram Ochani represented the Department of Revenue of the Finance Ministry.