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TMI Blog2023 (6) TMI 828X X X X Extracts X X X X X X X X Extracts X X X X ..... be duly authorized at the time of making payment of stipend on the behalf of the NEEM trainer/the recipient. There is only one supply of deployment of NEEM Trainees, whereas, administration of Trainees is ancillary work of deployment of NEEM Trainee, entire working is as per NEEM Regulation. The terms of the agreement make it clear that the expenditure of payment of stipend to the NEEM Trainees was on his own and not on the behalf of the NEEM Trainer. The appellant, as per NEEM Regulations, has the sole responsibility to engage NEEM Trainees and supply them to Trainer under separate agreements - As per terms of para 3 and para 5.1 (xiii) of the agreement with LG, stipend will be paid by company / NEEM Trainer to the appellant and by the appellant to the NEEM Trainees, respectively. Whereas, as per para 8(a) of the agreement with Interplex, payment of stipend will be made by company / NEEM Trainer to the appellant and as per para 8(b), stipend will be paid by the appellant to the NEEM Trainees. It is the Appellant who is obligated to pay the stipend to the trainees. Since the trainee has registered with the Appellant/NEEM Facilitator, it is the responsibility of the Appellant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 2013, having its registered office at A-1. Miner Apartments, 1 st Floor, Plot No. 83. Law College Road. CTS No. 124/1. Erandwana, Pune-411004 ( hereinafter referred to as the Appellant ) against the advance Ruling No. GST-ARA-122/2019-20/B-54 dated 27.04.2022 . The Appellant is registered under the CGST Act and MGST Act bearing GSTIN 27AAGCC6533K1ZF, effective from 01.04.2018, in the State of Maharashtra. 3. Brief Facts of the case 3.1 The Appellant was originally incorporated as M/s. CLR Skills Training Foundation and tiled application for ruling under same name. This name was changed on 25.06.2021 to M/s Firstbridge Skill Foundation, which was again changed on 27.07.2021 to its present name viz. M/s Beep Skills Foundation, which further changed on 8.10.2021 to M/s Beeup Skills Foundation. 3.2 With an objective to offer on the job practical training to enhance employability of a person either pursuing his or her Post Graduation/ graduation/diploma in any technical or non-technical stream or has discontinued studies after Class 10th to enhance his/her employability, the Ministry of Human Resource Development, Government of India, through All India Council for T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18. 3.9 Before initiation of training under NEEM, a NEEM Trainee must first enrol himself with the Appellant by signing a contract letter in the format prescribed in Annexure-II to AICTE (NEEM) Regulations. The contract letter is neither an offer of employment nor a guarantee of employment. As per letter, if contract is terminated because of failure on the part of NEEM Trainee, Trainee shall refund to the NEEM Facilitator as cost of training such amount as determined by the NEEM Facilitator. 3.10 The Appellant has further partnered with various companies/ industries who are desirous of registering themselves with the Appellant under AICTE (NEEM) Regulations as NEEM Trainer for deployment of NEEM Trainees and facilitation of their on job training. Appellant submitted specimen copies of the Training Collaboration Agreement dated 07.03.2019 entered between the Appellant and LG Electronics India Private Limited (for brevity called as LG) and the Training Services Agreement dated 12.02.2019 between the Appellant and Interplex Electronics India Pvt. Ltd. (for brevity called as Interplex) Appellant has submitted that the specimen copies are similar to the agreements they have entere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be liable to pay GST. (x) The Trainer shall ensure that the personnel providing the training are fully competent and qualified to provide the training, shall observe the health, welfare and safety standards during the training. (xi) The appellant shall pay stipend to the Trainees engaged by the company. Pay to the Appellant by the 2nd of every month, a consolidated amount as monthly stipend in consideration for the deployment of the trainees which is to be utilized by the Appellant solely for the purpose of paying the trainees. (xii) The company shall convene periodic meetings with the Appellant to discuss issues concerning areas for improving the training. (xiii) The company shall not initiate disciplinary proceedings against any trainee without intimation to the Appellant. (xiv) The Trainer shall notify the Appellant in writing if it is desirous of offering employment to any trainee during or after the completion of the training. 3.12 The role of the Appellant can be summarized as under: (i) Partner with various trainers and employers/company/industry for providing on-the-job training to the NEEM trainees. (ii) Deploy the trainee in a suitable industr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as notified for the NEEM trainee. 7.4 NEEM trainee can terminate the contract entered into with the NEEM Facilitator where the NEEM Facilitator fails to honour any of the terms of the contract by giving a written notice 30 days in advance to the NEEM Facilitator. 7.5 The selection of a NEEM trainee does not constitute an employment contract with NEEM. Facilitator or the company/industry where the NEEM trainee is placed for training under the contract. 10.1 NEEM Facilitator shall comply with the necessary provisions and the applicable Acts, to ensure welfare, safety and health aspects of the trainees while they undergo training. 12.0 NEEM FACILITATOR S LIABILITY FOR COMPENSATION FOR INJURY 12.1 lf personal injury is caused to a NEEM trainee, by Incident/accident arising out of and in the course of his training as a NEEM trainee, NEEM Facilitator shall be liable to pay compensation which shall be determined and paid, so far as may be, in accordance with the provisions of the Workman Compensation Act, 1923 as amended from time to time. 15.0 REMUNERATION / STIPEND 15.1 NEEM Facilitator shall pay all enrolled NEEM trainees a remuneration/stipend which shall be at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payment of Goods and Service Tax ( GST )? Answer : Not answered in view of discussions made above. 3.16 It was, inter alia, held and observed in the impugned advance ruling that: 5.3.1.2 We first of all observe that the agreement is not signed by LG and therefore the validity of the said agreement is in question and in doubt. Further, we also seen that, as per Clause 4 of the agreement mentioned above, the said agreement has expired on 29.02.2020 and therefore not valid after the said date and even if the contents of the said agreement are taken into account, notwithstanding the invalidity of the same due to absence of signatures of relevant parties to it, it would appear that the supply under the said agreement had been completed even prior to the date of the subject application which has been made on 11.3.2020 and in view of the provisions of Section 95 of the CGST Act, the application pertaining to this agreement would not be maintainable since the question raised by the applicant would not be in respect to a supply being undertaken or proposed to be undertaken by the applicant at the time of filing the subject application. Therefore, we do not take into consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has not raised any objection in relation to the contract between the Appellant and LG. The revenue has further accepted the GST paid by the Appellant in relation to services provided and invoices raised under the said contract. 4.2.1 The appellant termed finding that the said contract has already expired even before the date of filing of the application as irrelevant. The Appellant stated that he had sought advance ruling in relation to a particular business and not in relation to a particular contract. He stressed that the business was ongoing and carried on by the Appellant on the date of making the advance ruling application. 4.2.2 It was submitted that the AAR has erred in giving a very narrow meaning to Section 95 of the CGST Act. The meaning of phrase in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant is not to be read in the context of one of the contracts, but it has to read in the context of the business. An applicant may acquire new clients and lose earlier one while doing a particular business. What is relevant is the nature of business in relation to which advance ruling is sought should be either ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a clear answer on its liability to pay GST on the reimbursement amount received from NEEM Trainer towards Stipend and other expenses incurred by the Appellant in accordance with AICTE (NEEM) Regulations to ensure wealth, safety and health of NEEM Trainees . 4.5 Without prejudice to above and in any event, it was submitted that the AAR never put the Appellant to the notice that it is of the view that the documents furnished by the Appellant were incomplete and inconclusive and it cannot answer the question raised on the basis of the said documents. It was further submitted that the impugned advance ruling passed by the AAR is in violation of the principles of natural justice. He invited our attention to the second proviso to Section 98(2) of the CGST Act which provides that no application shall be rejected unless an opportunity of hearing has been given to the applicant. 4.6 It was submitted that, since the questions regarding the validity/genuineness of the specimen contracts were never posed to the Appellant, it was incumbent upon the learned AAR to provide an opportunity of hearing to the Appellant before deciding upon the application. In view of the above, he stressed tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NEEM Trainees in accordance with AICTE (NEEM) Regulations is in the capacity of pure agent u/r 33 of the CGST Rules, which shall be excluded from the value of supply. 4.8.4 The Appellant claimed that it satisfies all the criteria prescribed under Rule 33 of the CGST Rules to qualify as pure agent in as much as: (i) The NEEM Trainer has engaged NEEM Trainees and authorized the Appellant to pay them the stipend and incur other expenses for their wealth, safety and health. The service to NEEM Trainer is provided by NEEM Trainees. (ii) The stipend amount and other expenses incurred by the Appellant on NEEM Trainees towards their wealth, safety and health are agreed in the agreement and also indicated separately in the invoice issued by the Appellant on the NEEM Trainer. (iii) The reimbursement of stipend amount and other expenses incurred by the Appellant to ensure wealth, safety and health of NEEM Trainees are on actual basis and is in addition to the administrative fee received by the Appellant for the supplies made by it. (iv) There is a contractual arrangement between the Appellant and NEEM Trainer under which the Appellant is paying stipend to NEEM Traine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement of payments made on behalf of service recipient are not includible in the value of service provided by the service provider. 4.10 In view of the above, appellant submitted that, the reimbursement of Stipend amount and other expenses incurred by the Appellant in accordance with AICTE (NEEM) Regulations to ensure wealth, safety and health of NEEM Trainees from NEEM Trainer is in the capacity of a pure agent and hence, not required to include the same in the value of taxable supply made by the Appellant to NEEM Trainer for the purpose of payment of GST. 5. PERSONAL HEARING AND ADDITIONAL SUBMISSION 5.1 In terms of section 101 (1) of the CGST Act, 2017, the appellant was given personal hearing on 28.02.2023. Shri Arun Jain, Advocate, appeared for personal hearing on behalf of the Appellant. During the personal hearing he reiterated the grounds of appeal. He reiterated written submission made along with the application. 5.2 In order to explain the appellant s case with reference to definition and conditions of pure agent u/r 33 of the CGST Rules, 2017, the Ld Advocate made the following additional submission, which we find not more than the earlier one: 5.2.1. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Commissioner of S.T.. Mumbai-VI v/s. Shri Krishna Chaitanya Enterprises reported in 2018 (14) G.S.T.L. 533 (Bom.) The issue before the Hon ble High Court was whether service tax would be applicable on maintenance charges collected by builder for up-keep of the apartment or premises before formation of co-operative society. 5.2.6. It was submitted that provisions pertaining to pure agent under GST are in pari materia with service tax and therefore. he contended that the above case law applies squarely to the present case. 5.2.7. In view of the above. it was submitted that, as a NEEM Facilitator, the appellant is satisfying all the conditions of a pure agent and therefore, he is not liable to GST on the reimbursement of the stipend amount received from NEEM Trainer. 6. DISCUSSION AND FINDINGS 6.1 We have gone through the appeal memorandum encapsulating the facts of the case, written submissions and oral submissions during personal hearing. We have also gone through the case laws cited. 6.2 It is seen from the AAR and grounds of appeal that AAR Authority has not given ruling on the questions asked, but raised some doubts on the validity of the contracts and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent of the recipient of supply; (c) does not use for his own interest such goods or services so procured; and (d) only the actual amount incurred to procure such goods or services in addition to the amount received for supply he provides on his own account. Illustration - Corporate services firm A is engaged to handle the legal work pertaining to the incorporation of Company B. Other than its service fees, A also recovers from B, registration fee and approval fee for the name of the company paid to the Registrar of Companies. The fees charged by the Registrar of Companies for the registration and approval of the name are compulsorily levied on B. A is merely acting as a pure agent in the payment of those fees. 6.4 On perusal of the said rule, it has been noticed that the rule has been divided in three parts. The first part contains conditions towards the amount incurred by a person in the capacity of Pure Agent on behalf of his recipient. The second part contains terms to understand the expression Pure Agent . Third part is explaining an illustration regarding understanding the concept of transaction done by the Pure Agent. 6.5 To qualify m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of NEEM Trainees is a dominant part of business and activities like NEEM Trainee sourcing, etc are allied and dependent works. Therefore, other than deployment of trainees as per the NEEM Regulations, no other service is supplied by the Appellant. Thus, on this count also, the appellant is not fulfilling the prescribed conditions in rule 33. In fact there won t be any service if the dominant service of provision of trainees is removed. Additional supply may not be necessary For fulfilling the main dominant supply. However, in the present case, the provision of NEEM Trainees cannot be treated as additional supply because, as stated above, its absence makes the remaining transaction unenforceable. 6.6 Explanation to Rule 33 for meaning of Pure Agent 6.6.1 (a) Contractual Agreement Both parties (Pure Agent and Recipient of the Pure Agent) shall have agreed to that the Pure Agent shall incur expenditure during supply of goods or services or both on behalf of the recipient. In this case, there was an agreement between Facilitator and Trainer that payment will be made after invoice is made to the industry partner (Trainer) including details of stipend, thereupon stipe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pellant s management fees of Rs 720/-. This shows that GST is pre-decided to be collected, as per the agreement, on the gross value including on stipend. 6.9 A perusal of sample invoices attached (Tax Invoice No SADEL000055/1920 DT 25.11.2019 for Nov 2019 raised on LGEIPL for Rs. 113024 + IGST of Rs 20344.32 and Tax Invoice No SAKAR000107/1920 DT 26.11.2019 for 21.10.2019-20.11.2019 raised on IEIPL for Rs 539907 + IGST of Rs 97183.26) shows that GST is separately collected on entire billed amount by the appellant from both Trainers. 6.10 As per terms of para 3 and para 5.1 (xiii) of the agreement with LG, stipend will be paid by company / NEEM Trainer to the appellant and by the appellant to the NEEM Trainees, respectively. Whereas, as per para 8(a) of the agreement with Interplex, payment of stipend will be made by company / NEEM Trainer to the appellant and as per para 8(b), stipend will be paid by the appellant to the NEEM Trainees. Further, as per para 8 of the lnterplex agreement, the Trainer shall pay to the appellant amount as per applicable SOW enclosed to the agreement, which is inclusive of 18% GST on the entire consideration (including stipend). 6.11 Moreover, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he discussion cited above makes it ample clear that it is the appellant, who is directly responsible to pay stipend to the NEEM Trainees and there is no authorisation by the NEEM Trainer to patstipend on the behalf of the Trainer. We therefore, find that the Appellant fails to satisfy condition (i) of Rule 33. 6.14 We also find that Appellant fails to satisfy the 3rd condition of Rule 33 i.e. the supplies procured by the pure agent from the third party as a pure agent of the recipient of supply are in addition to the services he supplies on his own account. We find from the agreement with the industry partner that, other than deployment of trainees as per the NEEM Regulations, no other service is supplied by the Appellant. All the charges billed by the Appellant on the Company are only in connection with the deployment of trainees for training under NEEM Regulations. Even the stipend paid to the Appellant, albeit for the sole purpose of disbursing to the trainees, is only a consideration paid to the Appellant for the deployment of the trainees. This is made clear by Para 3 of the Agreement (between appellant and LG) relating to Stipend which states thus: In consideration o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the definition of pure agent as given in the explanation to Rule 33. 6.16 The Appellant had drawn our attention to the Maharashtra Authority for Advance Ruling given in the case of Yashswi Academy for Skills. Attention has also been invited to the ruling given by the Karnataka Authority for Advance Ruling in the case of Cadmaxx Solutions Education Trust. In these AARs, it has been held that the stipend amount required to be paid by the trainer to the trainee, which is paid through the applicant (a NEEM Facilitator) is not taxable in the hands of the applicant since the applicant is only acting as a pure agent. We have gone through the said rulings and find that in these cases. the Authorities have not examined the case in the light of provisions contained in rule 33 and the NEEM Regulations. 2017. Therefore, these rulings are of no assistance in the present case. 6.17 The appellant also cited AAR in the case of Asiatic Clinical Research and further supported by the decision of the Hon ble Tribunal in the case of Rolex Logistics Pvt. Ltd. v/s. Commissioner of Service Tax. Bangalore [2009 (13) S.T.R. 147 (Tri.-Bang.)], wherein, the Hon ble Tribunal has held that reimburse ..... 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