TaxTMI 
TaxTMI 
2026 (4) TMI 668
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....37 dated 28-12-2023 along with Form DRC-1, issued by respondent No. 2, enclosed as Annexure-B, for the reasons stated in the grounds. (C) Issue a writ of certiorari or any other writ or direction to quash impugned SCN No. ACCT/Audit-1/HBL/GST/DRC-1/23-24/B-338 dated 28-12-2023 along with Form DRC-1, issued by respondent No. 2, enclosed as Annexure-C, for the reasons stated in the grounds. (D) Issue a writ of certiorari or any other writ or direction to quash impugned SCN No. ACCT/Audit-1/HBL/GST/DRC-1/23-24/B-339 dated 28-12-2023 along with Form DRC-1, issued by respondent No. 2, enclosed as Annexure-D, for the reasons stated in the grounds. (E) Issue a writ of certiorari or any other writ or direction or order to declare Notification 9/2023-CT dated 31st March, 2023, issued by respondent No. 3, enclosed as Annexure-E, as ultra vires Section 168A of CGST Act, 2017 for the reasons stated in the grounds. (F) Issue a writ of certiorari or any other writ or direction or order to declare Notification No.06/2023 dated 06.04.2023, issued by respondent No.4, enclosed as Annexure-F as ultra-vires Section 168A of KGST Act, 2017 for the reasons stated in th....
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....gents are employees of the Bank and hence, no GST can be levied on the salary paid to them. It was also contended by the Bank that pigmy agents do not come under the ambit of business facilitators to attract reverse charge levy. The aforesaid was the reply submitted by the petitioner to the 1^st respondent. The petitioner also replies to the 2nd respondent on the same lines. 3.3. Finding the reply to be unsatisfactory, the 1st and 2nd respondents issued show cause notices to the Bank between 27-12-2023 and 28-12-2023. The petitioner now challenges these notices issued to the Bank, on the score that it is not liable to pay any CGST for any regime or the KGST. The petitioner, apart from challenging the show cause notices so issued, also challenges the notification which extended the time limit for issuing show cause notices under Section 73 of the KGST or CGST Acts as ultra vires of Section 168A of the CGST Act. The aforesaid is the broad contours of challenge in the case at hand. SUBMISSIONS: PETITIONER: 4. The learned senior counsel for the petitioner Sri V.Raghuraman would vehemently contend that pigmy agents are employees of the Bank and, therefore, their services can....
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.... of deposits. It can be extended to other services. They are akin to business correspondents. Therefore, the charge of GST is valid and legal. 6. I have given my anxious consideration to the submissions made by the respective learned counsel and have perused the material on record. In furtherance whereof, the only issue that falls for consideration is: THE ISSUE: "Whether the petitioner is liable to discharge Goods and Services Tax, on the services rendered and commission paid to the pigmy agents?" CONSIDERATION: Nature of employment of pigmy agents: 7. The learned senior counsel with considerable emphasis contends that pigmy agents are in essence and in law, employees of the Bank. Consequently, the services rendered by them cannot be brought within the taxable net of GST. It is further urged that such agents fall within the definition of 'workmen' under the Industrial Disputes Act, 1947 thereby fortifying the existence of employer-employee relationship. The question as to the true nature of engagement of deposit collectors/pigmy agents, whether they are workmen within the meaning of the Industrial Disputes Act, 1947 or independent agents, has not remained i....
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....unction with Section 7(2)(a) and schedule III forms statutory edifice governing the issue in the lis. It reads as follows: "7. Scope of supply.-(1) For the purposes of this Act, the expression "supply" includes- (a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; [(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice-versa, for cash, deferred payment or other valuable consideration. Explanation.-For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;] (b) import of services for a consideration whether or not in the course or furtherance of business; [....
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....ransportation of the deceased. 5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. 6. Actionable claims, other than [specified actionable claims]. 7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. The legislative intent, in terms of sub-clause (1) of Schedule-III clearly holds that the services rendered by an employee to the employer in the course of, or in relation to, his employment are placed outside the ambit of 'supply' and, therefore, exempt from GST. Schedule III in unambiguous terms, renders this exemption. Although the GST enactments do not define the expressions employer and employee, their contours have been sculpted through judicial pronouncements. It becomes necessary therefore to draw upon the jurisprudence that is replete, as laid down by the Apex Court. The nature of duties performed by pigmy agents, as evidenced through the terms of their engagement unmistakably reflects employer-employee relationship. 9. In the case at hand, the petitioner/Bank exercises complete control over the agents as per the....
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.... is incurred by the Bank in respect of any loss or damage or other injury sustained, incurred for whatsoever reason or occasioned by dishonesty or fraud or cheating or any act of commission or omission or negligence in relation to the duties as Vikas Nirantara Deposit Agent, the Bank shall be at liberty to adjust and appropriate in part or full, the amount either of the security deposit or any other moneys available to the credit of the agent with it, now or hereafter without any reference to the agent in this behalf. *Select whichever is applicable. The right of the Bank over these securities shall be absolute and the Agent may be entitled to the refund of the same only upon his full acquiescence by the Bank. The bank will pay interest to this deposit at the highest rate applicable to term deposits of public, prevailing at the relevant time. The deposit rates are subject to change from time to time. 6. (A) The Agent has agreed to be a Vikas Nirantara Deposit Agent on the commission at rates determined by the Bank, and as laid down by the final Award of the industrial Tribunal, Hyderabad in ID 14/1980 dated 22.12.1988 as modified by the Judgment ....
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.... Bank. He also agrees to keep the Bank informed in writing, of his inability to make collections of deposits on any day or days. On getting such information the Bank is at liberty to make alternate arrangements for the collections of Vikas Nirantara deposit in respect of the cards dealt with by the Agent, during the period of his inability to collect the same, without reference to him. When such other Stationery as desired by the Bank to such person appointed by the Bank and from him he shall obtain the cards back after he is able to make the collections. It is made clear that the Agent is not entitled to for any fall back wages / commission for the amounts not collected by him and the agent should not entrust the work of collection to any other agent of this or any other branch of the Bank or to any other unauthorized person on his own. The agent shall have no right whatsoever to appoint a Sub-Agent. He shall deposit the Machine at the branch on the days he is not able to collect contributions towards Vikas Nirantara deposit scheme for whatsoever reason." The agreement governing the engagement of these pigmy agents reveal several telling features: The bank exercises pervasive c....
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.... control over the workers' subsistence, skill, and continued employment. If he, for any reason, chokes off, the worker is, virtually, laid off. The presence of intermediate contractors with whom alone the workers have immediate or direct relationship ex contractu is of no consequence when, on lifting the veil or looking at the conspectus of factors governing employment, we discern the naked truth, though draped in different perfect paper arrangement, that the real employer is the Management, not the immediate contractor. Myriad devices, half-hidden in fold after fold of legal form depending on the degree of concealment needed, the type of industry, the local conditions and the like may be resorted to when labour legislation casts welfare obligations on the real employer, based on Articles 38, 39, 42, 43 and 43-A of the Constitution. The court must be astute to avoid the mischief and achieve the purpose of the law and not be misled by the maya of legal appearances." 10.3. The Apex Court, in SUSHILABEN INDRAVADAN GANDHI v. NEW INDIA ASSURANCE COMPANY LIMITED (2021) 7 SCC 151 holds as follows: ".... .... .... 32. A conspectus of all the aforesaid judgments wou....
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.... decisions and the test of whether the employer has economic control over the workers' subsistence, skill and continued employment can also be applied when it comes to whether a particular worker works for himself or for his employer. The test laid down by the Privy Council in Lee Ting Sang v. Chung Chi-keung [Lee Ting Sang v. Chung Chi-keung, (1990) 2 AC 374 (PC)], namely, is the person who has engaged himself to perform services performing them as a person in business on his own account, is also an important test, this time from the point of view of the person employed, in order to arrive at the correct solution. No one test of universal application can ever yield the correct result. It is a conglomerate of all applicable tests taken on the totality of the fact situation in a given case that would ultimately yield, particularly in a complex hybrid situation, whether the contract to be construed is a contract of service or a contract for service. Depending on the fact situation of each case, all the aforesaid factors would not necessarily be relevant, or, if relevant, be given the same weight. Ultimately, the Court can only perform a balancing act weighing all relevant factors....
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....l or a business correspondent model bears definition in a subsequent official memorandum. The business facilitator model and business correspondent model read as follows: "2. Business Facilitator Model: Eligible Entities and Scope of Activities 2.1 Under the "Business Facilitator" model, banks may use intermediaries, such as, NGOs/Farmers' Clubs, cooperatives, community based organisations, IT enabled rural outlets of corperate entities, Post Offices, insurance agents, well-functioning Panchayats, Village Knowledge Centres, Agri Clinics/ Agri Business Centers, Krishi Vigyan Kendras and KVIC/ KVIB units, depending on the comfort level of the bank, for providing facilitation services. Such services may include (i) identification of borrowers and fitment of activities; (ii) collection and preliminary processing of loan applications including verification of primary information/data; (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling; (iv) processing and submission of applications to banks; (v) promotion and nurturing Self Help Groups/ Joint Liabilit....
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....or (BF) in GST Act is borrowed from the RBI Circular No. 58/22-01-001/2005-06 Dated: 25-01-2006. As per the RBI Circular, mentioned above in Para 2. Business Facilitator Model: Eligible entities and Scope of activities: 2.1 Under the Business Facilitator model, banks may use intermediaries, such as, NGOs/Farmers' clubs, Cooperatives, community based organizations, IT enabled rural outlets of cooperate entities, Post officer, insurance agents, well-functioning Panchayats, Village knowledge Centers, Agri Clinics/ Agri Business Centers, Krishi Vigyan Kendra sans KVIC/KVIB units, depending on the comport level of the bank, for proving facilitation services, Such services may include (i) identification of barrows and fitment of activities; (ii) collection and preliminary processing of loan application including verification of primary information/data/; (iii) creating awareness about savings and other products and education and advice on managing money and debt counselling; (iv) post-sanction monitoring; (vii) monitoring and handholding of self-help Groups/ Joint liability Groups/Credit Groups/ others; and (viii) follow ....
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....ces or both on behalf of another, S. 2(88) "principal" means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both; The person for whom such act is done, or who is so represented, is called the "principal". As delineated in the definition, an agent can be appointed for performing any act on behalf of the principal which may or may not have the potential for representation on behalf of the principal. So, the crucial element here is the representative character of the agent which enables him to carry out activities on behalf of the principal. 3. The following two key elements emerge from the above definition of agent: Circular No. 57/31/2018-GST a) the term "agent" is defined in terms of the various activities being carried out by the person concerned in the principal-agent relationship; and b) the supply or receipt of goods or services has to be undertaken by the agent on behalf of the principal. Therefore, as per the provisions of the GST Act, the service rendered by the pigmy agents to bank is taxable service, it is clearly Principal-Agent relationship and the same falls und....
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....mmission at 10% on recovery of bad debts. The Tax payer is utilising the services of the Pigmy agents on par with Business Correspondents/ Facilitators. Therefore, the Tax payer is liable for payment under the provisions of GST Act in case of Pigmy agents also, as the Pigmy agents are providing their services on par with Business Facilitators apart from terms of agreement made with the Tax payer. In view of the above discussions, you are hereby given an opportunity to show cause as to why you should not pay the amount of Tax specified as below along with applicable interest thereon till the date of payment of tax U/s 50 within 7 days from the receipt of this notice. Failing to comply with this Show cause Notice, action as deemed fit under the provisions of KGST/CGST Act, 2017 will be initiated. Further, it is to be noted that, if you fail to pay the amount as ascertained by the undersigned within 30 days of issue of Show Cause Notice, you will be liable for Penalty U/s 122 of the Act. Sl.No. Observation Turnover Tax Interest Total CGST SGST CGST SGST CGST SGST 1. RCM on commission paid to the pigmy agents in Urban branches....