Page 87 - GSTL_30th April 2020_Vol 35_Part 5

2020 ] RAJASTHAN STATE MINES & MINERALS LTD. v. COMMR. OF C. EX. & S.T., JAIPUR 573
been issued till date, we find ourselves in total agreement with the reasons
given in this Draft Circular, whose Paras 5 and 6 read thus :
“Joint Employment
5. There can also be cases where staff is employed by one or more
employers who normally share the cost of such employment. The
services provided by such employee will be covered by the exclu-
sion provided in the definition of service. However, if the staff has
been engaged by one employer and only made available to other for
a consideration, it shall not be a case of joint employment.
6. Another arrangement could be where one entity pays the salary
and other expenses of the staff on behalf of other joint employers
which are later (sic) from the other employers on an agreed basis on
actual. Such recoveries will not be liable to service tax as it is merely
a case of cost reimbursement.”
7.1 We find that in the present case, the revenue would have had no objec-
tion if the contract of employment with the employees had been signed
jointly by all the employer-companies, and if these employer-companies
were paying their respective share of salary to the employees directly. The
problem in the present case has arisen only because instead of the employer
companies signing the appointment letter jointly, only one of them has
signed the same and then shown the employees as lent or deputed to other
companies for their work. The reason for entering into such an arrangement
is not difficult to see as employees may not be willing to sign contracts with
several employer-companies who collectively do not even constitute a sep-
arate legal entity. Not only for this reason, but even for the sake of conven-
ience in contracting and accounting, contracts of such joint employment
may be signed by only one employer-company and not by all. This, howev-
er, cannot make a difference to the taxability or otherwise of the employ-
ment contract. No doubt, an employee who signs a contract of employment
with one company can legitimately refuse to work for another company, ei-
ther on deputation or on secondment, if such employment contract is silent
on the employer’s right to depute or second the employee. However, if
such an employee consents to such deputation or secondment to another
company and willingly works for other employer-companies for long peri-
ods of time, knowing fully well that his emoluments are being paid by such
other companies, his contract of employment with a single employer will,
by virtue of the parties conduct, transform itself into a contract of joint em-
ployment with several employers. In the present case too, employees have
been working for many years with several group companies who have, in
terms of a pre-existing understanding amongst themselves, been sharing
the actual cost of employment on an agreed basis. The collective conduct of
the employees and the employer-companies for long period of time has the
effect of establishing that the contract of employment is one of the joint em-
ployment.
7.2 Even otherwise, by its very nature, a situation where employer-
companies have a pre-existing agreement to hire employees on joint basis
and agree to share the cost of employment on actual by dividing it amongst
themselves in such a manner that each employer bears only his part of the
cost indicates that there was no intention amongst the employer-companies
to render any service to each other. It indeed the intention of the parties
would have been otherwise, the employer-company which takes the trou-
ble of hiring an employee in its own rolls would have insisted on some
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