In Re : M/s JSW Energy Limited
GST
2018 (7) TMI 511 – APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – 2018 (14) G. S. T. L. 571 (App. A. A. R. – GST), [2019] 69 G S.T.R. 88 (AAAR)
APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA – AAAR
Dated:- 2-7-2018
MAH/AAAR/SS-RJ/01/2018-19
GST
Rajiv Jalota (Member) and Smt. Sungita Sharma, (Member)
PROCEEDINGS
(under Section 101 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provisions under the MGST Act.
The present appeal has been filed under Section 100 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter
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Appellant's power plant is divided into four units and the said Job Work Arrangement is pertaining to Unit III and Unit IV of the power plant. These are in the nature of captive power units and by virtue of the arrangement, JSL would be construed as Principal and JEL would be working as Job Worker.
D In terms of the proposed arrangement, JSL would procure coal or any other inputs (herein after collectively referred to as 'inputs') and supply the same to the Appellant for the purpose of carrying out the activity of generation of power. On receipt of the same, Appellant would, undertake certain processes to convert the said inputs into power. The detailed process is explained in Exhibit – 1 to the Appeal. The power generated from the aforesaid process on inputs will be supplied back to JSL for which the Appellant would be receiving job work charges as per the rate that would be agreed as per the Job Work Arrangement. During the whole process under the Job Work Agreement, the
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lso made additional written submissions on 20.02.2018 reiterating all the submissions made in the application and certain additional grounds including response to queries raised by AAR. A copy of the additional submissions was enclosed as Exhibit – 3 to the Appeal.
Order passed by AAR
H. The Order dated 05.03.2018, received by the appellant on 09.03.2018, has been passed by AAR holding that the proposed transaction amounts to manufacture and therefore it would not qualify as 'job work' under GST on account of the following:
i. The proposed activity of the Appellant is manufacture which cannot be read into the words 'treatment or process' as found in the definition of 'job work'.
ii. The Impugned Order, relying on the decision of Manganese Ore India Ltd. V. State of M.P. [(2017) 1 SSC 81] has held that intent of the legislation is not to cover such 'treatment or process' into the ambit of the 'job work' which results into a distinct commodit
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–
GROUNDS OF APPEAL
JOB WORK WIDER IN SCOPE TO ALSO INCLUDE MANUFACTURE
The AAR has grossly erred in passing the Impugned Order in law while attempting to interpret job work as a process or treatment which does not result in manufacture of a distinct commodity.
2. On perusal of the relevant provisions of CGST Act, it is submitted that if all of the following conditions are fulfilled, the transaction would qualify as an activity of job work and consequently the Principal will be allowed to send the goods without payment of tax viz:
(i) Treatment or process should be undertaken by a person;
(ii) Such treatment or process should be on goods; and
(iii) These goods should belong to another registered person
3. The Impugned Order does not dispute the fact that the conditions stated above are getting fulfilled in respect of the transaction between JSL and the Appellant, except condition (i) as stated above. The entire edifice on which the Impugned Order stands is
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nput goods into a new commodity. For this proportion, we draw support from the decision of the Hon. Supreme Court in Manganese Ore India Ltd. v. State of M.P., (2017) 1 SCC 81 : 2016 SCC Online SC 1280 which has very lucidly explained the meaning of the term 'treatment and processing'.
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Page 10 of the Impugned Order after the definition of 'manufacture' under the CGST Act,
As can be seen the definition itself says that the emergence of a new product from the processing of the inputs would be a manufactured product. In the Instant case the end product i.e. “electricity” has a distinct name, character and use than the inputs i.e. “coal”. Thus, when the Legislature has provided for the definition of 'job work' as well as 'manufacture', the meaning as understood by the definition of 'manufacture' cannot be read into the words 'treatment or process' as found in the definition of 'job work'. 'Treatment',
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” means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term “manufacturer” shall be construed accordingly;”
5. The harmonious interpretation of the above definitions, in order to understand the meaning of job work' can be explained by way of the following diagram –
6. On perusal of the definition as illustrated by way of above diagram, it is evident that every processing activity when carried out on the raw material or inputs belonging to another person will qualify as job work. However, when such job work results in emergence of a new and distinct commodity, only then it falls within the ambit of manufacture. Therefore, the way terms have been defined under the CGST Act, manufacturing activity is a sub-set of job work. That is to say if a person undertakes processing of raw material / inputs belonging to another person then the said activity would qualify as job work, which if result
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VAT Credit Rules, 2004 ('Cenvat Rules').
9. The Appellant wants to place reliance on the FAQ on GST issued by the CBEC updated till January 1, 2018, in which CBEC clarified that the definition under CGST Act is much wider than the one given under the Notification. The copy of the FAQ is enclosed with the Appeal as Exhibit – 5. The relevant extract of the FAQ is reproduced herein:
“Q1. What is job work?
Ans. Job work means undertaking any treatment or process by a person on goods belonging to another registered taxable person. The person who is treating or processing the goods belonging to other person is called 'job worker' and the person to whom the goods belongs is called 'principal'.
This definition is much wider than the one given in Notification No. 214/86 – CE dated 23rd March 1986. In the said notification, job work has been defined in such a manner so as to ensure that the activity of job work must amount to manufacture. Thus, the definition of job w
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processing. Many facilities, procedural concessions have been given to the job workers as well as the principal supplier who sends goods for job-work. The whole idea is to make the principal responsible for meeting compliances on behalf of the job-worker on the goods processed by him (job-worker), considering the fact that typically the job-workers are small persons who are unable to comply with the discrete provisions of the law.
The GST Act makes special provisions with regard to removal of goods for job-work and receiving back the goods after processing from the job-worker without the payment of GST. The benefit of these provisions shall be available both to the principal and the job-worker.”
11. Given the above, it is evident that CBEC itself emphasize on the widening of the scope of job work under the GST Regime which inter-alia includes every kind of processing activity, whether resulting into manufacture or not. Therefore, taking any contrary view would lead to an incongruous
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to manufacture, and just because activities undertaken result in a new commodity, it cannot be said that there was no job work involved. The relevant paragraph is reproduced below
“We observe that there is no dispute by the Revenue on the duty payments made on the finished products, namely, hydraulic power pocks by the appellant which were cleared from the job workers' premises. There is also no allegation of undervaluation of the finished products either in the show cause notice nor any such findings has been recorded in the impugned order. Once the finished product has correctly discharged the liability there cannot be any leakage of revenue. Cenvat credit envisages that duty/tax paid on the input/input services will be available for discharge of duty liability on the finished products. It is not in dispute that the inputs were used in the fabrication/assembly of the finished products. Similarly, it is also not in dispute thot finished products did emerge at the job-workers'
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of the Hon'ble Tribunal is clearly applicable in the facts of the present case in as much as the Impugned Order has held that the proposed activity of the Appellant cannot amount to job work since the activities undertaken by the Appellant would result into a distinct commodity. In view of the above decision, the proposed activity would amount to job work even if it amounts to manufacture.
14. In case of Commissioner of Central Excise, Mumbai-IV vs Ruby Mills Ltd. (2016 (343) E.L.T. 395 (Tri. Mumbai)) while considering the valuation method for an activity undertaken by the job worker, the Mumbai Bench of Tribunal upheld findings of the First Appellant Authority that job worker may undertake an activity which results in manufacture. The relevant extract of the judgment is reproduced below:
“11. We also find that the first appellate authority has correctly enunciated the law as to the activity of job work as to how it should be understood and the valuation of the said goods to be
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is submitted that the processing activity carried out on inputs owned by another person amounts to job work even if the resultant product is a distinct commodity.
ELECTRICITY CAN BE GENERATED ON JOB WORK IS A SETTLED LAW
17. The Appellant submits that it is well settled inter-alia in terms of the below mentioned judgments of the Courts that electricity being intermediate goods used in the manufacture of final product, can be generated on job work basis:
* Commissioner of Central Excise, Nagpur vs Indorama Textiles Ltd. (2010 (260) ELT 382 (Bom HC))
* Haldia Petrochemicals Ltd vs CCE, Haldia (2006(197) ELT 97 (Tri.- Delhi))
* Sanghl Industries Limited vs CCE, Rajkot (2006(206) ELT 575 (Tri.- Delhi))
* Sanghi Industries Limited vs CCE, Rajkot (2014(302) ELT 564 (Trl.- Ahmd.))
18. The above judgments cover Instances where materials (such as naphtha, light diesel oil, furnace oil, etc.) were supplied to the job worker for carrying out a specified process for the purpose of gener
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ate goods. There is no challenge to understanding/agreement between Respondent No. 1 and M/s. IRSL. We do not find anything perverse in findings recorded in paragraph 6 of the order No. A/67/2007/EB-C-ll, dated 31-1-2007 in Appeal No. E/3701/05-Mum. These reasons hold good even for second matter.”
19. Further the Supreme Court dismissed the appeal petition filed by the Commissioner of Central Excise Nagpur against the order of the Hon'ble Bombay High Court in the matter of Indorama Textiles Ltd (supra) – Commissioner of Central Excise, Nagpur vs Indorama Textiles Ltd.( 2010(260) E.L.T. A83(SC))
CGST Act does not provide for Restrictive Meaning of the word 'process' used in the Definition of Job Work
20. The Impugned Order has held that the word 'process' used in the definition of job work has to be read narrowly so as to exclude activities resulting in manufacture. The Appellant submits that wherever the intention of the law maker is to give a restricted meaning
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tute a composite supply”
21. The 'job work' definition does not provide any exclusion to 'manufacture' and hence should not be read narrowly. It is a settled law that the Act should be read as it is written without adding words not mentioned thereunder.
22. in view of the above submissions, the findings and assertions made by the Impugned Order as regards the differential meaning being assigned to the term 'process' used in job work as well as manufacture is based on erroneous understanding of fact and law and is unsustainable.
Commercial Parlance and Dictionary Meaning
23. The Appellant submits that since the terms 'treatment' or 'process' have not been defined under the GST legislation, reference is sought to the dictionary meaning which explain the said terms and are reproduced as follows:
Process
* a natural or involuntary operation or series of changes; handle or deal with by a particular process (The Oxford English Reference Dictionary 1
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g to Oxford Dictionary one of the meanings of the word process' is “a continuous and regular action or succession of actions taking place or carried on in a definite manner and leading to the accomplishment of some result.” The activity contemplated by the definition is perfectly general requiring only the continuous or quick succession. It is not one of the requisites that the activity should involve some operation on some material in order to its conversion to some particular stage. There is nothing in the natural meaning of the word 'process' to exclude its application to handling. There may be a process which consists only in handling and there may be a process which involves no handling or not merely handling but use or also use. It may be a process involving the handling of the material and it need not be a process involving the use of material…
25. In light of the above cited meanings and judicial interpretation, it is submitted that the term process is wide enoug
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ent relied upon in the Impugned Order, suggests a different application of the word 'process' very specific to the term used in relation to the mining activity and has no relevance in the current context.
28. It is a well settled position in law inter alia by the judgment of the Hon'ble Supreme Court in Bharat Petroleum Corporation Ltd. & Another vs. N.R. Vairamani & Another (AIR 2004 SC 4778) that reliance cannot be placed on decisions without discussing as to how the factual situation of a case fits in with the facts of the decision on which reliance is placed. Further in the case of Pan Parag India Ltd vs. DGFT (2016 (3 36) ELT 625 (Del))it was held that it is a settled law that precedent decisions are binding only when factual situation therein fits case under decision. Further, the observations of Courts must be read in the context in which they appear to have been stated.
29. The factual matrix in the Manganese Ores India Limited (Supra) can clearly be distinguished
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ps. In the Explanation, 'processing' is used in conjunction with other words i.e. crushing, treating and transporting and therefore, it was preferred to interpret the said word in the Explanation with reference to the words before and after it i.e. to be understood with the associated words. Further, it was held that the words 'crushing', 'treating' and 'transporting' are words of narrower significance and hence, the word 'processing' used between these words should also be given a narrower significance.
31. The Impugned Order fails to recognize the fact that in the same judgment the Hon'ble Apex Court held that the word 'processing' can have a wider meaning which would also include manufacturing. However, in the context of that case the word 'processing' has to be interpreted as per the Mines Act, 1952 and therefore will be restricted to the sense conveyed by the words 'crushing', 'treating' and 'transpor
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product…[Para 20)”
32. Therefore, it is submitted that the Impugned Order has erred in referring to the above decision, which was rendered in different factual and legal context while considering diverse issues, and which do not advance or support the findings in the Impugned Order.
Without prejudice, the HSN Code applicable to certain Job Work uses the word 'Manufacturing Service'
33. Without prejudice to any other submissions, the Impugned Order failed to appreciate that the HSN Code applicable for the certain specified job work activity clearly uses the word 'Manufacturing services'.
34. The applicable rate of tax in respect of services are provided in the Notification No. 11/ 2017 -Central Tax (Rate) dated 28.06.2017 (as amended from time to time) ('Rate Notification'). For certain specified job work services, the applicable HSN Code under the Rate Notification is '9988'.
SI No.
Chapter, Section or “heading
Description of Service
Rate (per
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ds falling under Chapter 48 or 49, which attract CGST @ 6 per cent.
6
–
(iii)…
2.5
–
(iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ii), (iia) and (iii) above.
9
–
35. It is submitted that the above mentioned HSN Code describe the service as “Manufacturing services on physical inputs (goods) owned by others” which inter-alia includes various different kind of job work services. The description itself indicates that the activity undertaken by the job worker can amount to manufacture. Considering this, it is the submission of the Appellant that the Impugned Order holding that proposed activity of the Appellant does not amount to job work since it amounts to manufacture is bad in law and must be set aside.
36. In view of the various submissions made above and on the harmonious reading of the CBEC clarifications, judgments cited in earlier paragraphs to this Appeal, definitions under CGST Act and dictionary meanings
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ifies as job work even if it amounts to manufacture may be confirmed.
any other consequential relief that this Appellate Authority may deem proper be granted.
Hearing and submissions
37. The representative who appeared on behalf of the appellant during the hearing proceedings deposed that AAR has misinterpreted the definition of Job work and construed that the treatment and process undertaken by a person on goods belonging to the other registered person should not result into distinct manufactured commodity and accordingly concluded that electricity generated by the appellant using the coal supplied by JSL is a different commodity with different name and use, thereby rendering the entire process/activities undertaken by the appellant as manufacture in terms of the definition as provided under Section 2(72) of the CGST Act, 2017. Thus, the process/treatment performed by the appellant on the coal supplied by JSL would not be covered under the Job work. The Appellant's representati
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osed;
(i) that processing of raw materials/inputs belonging to another registered person under job work procedure may or may not result into the emergence of new commodity.
(ii) That the definition of the 'Job work' under the GST Act, 2017 has widened the scope of the activities covered under the 'Job work' as compared to the definition provided under Notification No. 214/86-C.Ex. dated 23.03.1986
(iii) That any treatment or process by a person on goods belonging to another registered person is 'Job work', the person who treats or processes the inputs is called 'Job worker' and person to whom the goods belong is called 'Principal';
(iv) That Job work sector includes outsourced activities that may or may not culminate into manufacture
The appellant in their support referred to 2nd Edition : 31st March, 2017 (updated as on 1st January, 2018 of FAQ on GST issued by CBIC and the clarification issued by CBEC on Job work)
The appellant further de
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(v) Sanghi Ind. Ltd. Vs. CCE, Rajkot (Tri-Ahmd.)
The above four judgements cover instances where goods/materials such as Naphtha, Light Diesel Oil, Furnace Oil etc. were supplied to the job worker for the purpose of generation of electricity
The appellant further referred to the following judgements
(i) Collector of C.Ex. V/s. Rajasthan State Chemical Works (S.C.)
Para 2B – Bharat Petroleum, Pan Parag
Also, the representative of the appellant deposed that service codes have been given in the Chapter 99 of GST Tariff – Services and In Section 8, Heading No. 9988 at Sr.No. (iv), the services have been described as “manufacturing services” on physical inputs (goods) owned by others. During the course of hearing, when being asked about the present system for supply of electricity to their manufacturing units and whether they have any captive coal-run power plant in their manufacturing units for generation and supply of electricity, the appellant's representative
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nt's representative concluded his arguments with prayer that the impugned order passed by the Authority for Advance Ruling be set aside and appeal may be allowed.
38. Shri K.K. Srivastava, Addl. Commissioner, Kolhapur, CGST & C. Ex. Commissionerate who appeared on behalf of the concerned/jurisdictional Commissionerate representative contended the submissions/arguments offered by the appellant's representative saying that M/s. JEL are the manufacturer of electricity where coal is one of the main raw materials which is used as fuel in their coal fired power plant, whereas M/s. JSL are the manufacturer of steel and coal is not an input for the manufacture of steel as per the Standard Input Output Norms specified as per the Import Export Policy. The jurisdictional officer deposed that M/s. JSL are not having 'in-house coal fired power plant' for production of electricity for captive consumption and hence coal cannot be considered as input and hence cannot be sent for furth
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f the coal i.e the input has been completely lost. He further deposed that the coal neither being the raw material for the manufacture of steel or steel products by M/s. JSL nor being used as inputs for generation of electricity in the in-house coal fired power plant for captive consumption as discussed above does not qualify to be 'goods' for furtherance of business of M/s. JSL and hence cannot be supplied to M/s. JEL on the Job work basis.
39. As per the deposition made before the appellate authority during the hearing dated 19.06.2018, the appellant vide their letter dated 22.06.2018 made further additional submissions which are as under:
(1) The appellant inter-alia submitted that the Power Plant owned by them where the proposed Job work activity on the coal supplied by M/s. JSL Is to be undertaken Is a Captive Power Plant of JSW group. In respect of this, the appellant have enclosed the following documents
(i) A copy of the Board Resolutions dated 03.03.2011 where
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r sent back to the Principal or supplied by the appellant as per the direction of JSL.
(4) They further submitted that coal Is an Input for JSL placing their reliance upon the definition of the input as provided under Section 2 (59) of the CGST Act, 2017.
(5) In para 5.6, they further submitted that JSL has its own power plants for generation of electricity from different fuels at various locations including Dolvi, Maharashtra and Vijaynagar, Karnataka.
(6) In para 5.7, they submitted that the definition of the term 'inputs', read with the definition of business as provided in the CGST Act, 2017 indicates that scope of the term 'input' is very wide and would cover all goods used in the course or furtherance of business. To substantiate this claim, they cited various court and tribunal judgments.
(7) In para 5.9,they relied upon various Courts and tribunals judgments wherein credit have been allowed on inputs which have been used in the genera
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. 639(Tri.- Bang.)
(d) Bharat Commerce and Industries Ltd. V/s. Collector [1997 (94) E.L.T. A136]
Discussions
40. We have heard both the parties and gone through the submissions made by them. The Issue before us is to decide whether the activity undertaken by M/s JEL on behalf of M/s JSL is job work or otherwise. The answers to other questions will follow.
41. The Authority for Advance Ruling in their order dt. 05.03.2018 has decided that since M/s JSL are not the applicant in the proceedings, the ruling sought by M/s JEL on behalf of M/s JSL was not entertained. In respect of ruling sought by the applicant i.e. M/s JEL regarding conversion of coal (to be supplied by M/s JSL) into electricity, the Authority decided the same as supply of goods and not as job work. The main ground for decision of the Authority lies in the fact that definition of Job Work covers 'process and Treatment' on goods, whereas in the instant case the operations carried out by M/s JEL are beyond
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r not. Here, we are inclined to agree with the formulation laid down vide C. B.E.& C. Circular No. 38/12/2018 dt. 26.03.2018 on issues related to Job Work vide para 5, that
“…….the job work is expected to work on the goods sent by the principal and whether the activity is covered within the scope of job work or not would have to be determined on the basis of facts and circumstances of each case (emphasis supplied).
We now proceed further in the matter to examine whether the activity proposed to be conducted by M/S JEL on the goods supplied by M/s JSL would be covered under Job Work or not.
44. The Applicant has cited various judgments in support of their argument that the job work involved manufacturing and credit of duty was allowed even in respect of the inputs utilized in manufacture of intermediate goods used in the manufacture of final product. In this case, M/s. JSL are manufacture of Steel and steel products and M/s JEL are engaged in production of electricity, using coal
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and Rule 45 of the CGST Rules. In terms of Section 143(1)(a):
(1) A registered person (hereafter in this section referred to as the “principal”) may under intimation and subject to such conditions as may be prescribed, send any inputs or capital goods, without payment of tax, to a job worker for job work and from there subsequently send to another job worker and likewise, and shall,-
(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, jigs and fixtures, or tools, within one year and three years, respectively, of their being sent out, to any of his place of business, without payment of tax.
On a harmonious reading of the definition of Job Work and the procedure for the same, it is construed that the principal will send the inputs to the job worker for conducting any treatment/process/ which may, or may not amount to manufacture) and shall bring back the same after completion of job work or otherwise Therefore the
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l submission have provided the copies of Bills of Entry evidencing the Import of Coal for Dolvi Plant of M/s. JSL as well as Karnataka plant. A perusal of the said two documents leads us to understand that, though the two coal Items are geologically same, they are two different types, and that the Coal imported by M/s JSL Is coking coal and has a different usages compared to steam coal, being used by power plants for generation of electricity which is much cheaper as well. This shows that the inputs being utilized by M/s JSL for the manufacture of their final product i.e. Steel are not the same which they intend to send to M/s JEL for undertaking process on the same. Rather they are proposing to procure the steam coal which are inputs for the power plant of M/s JEL, the job worker and Intend to avail the credit of duty on the same which is otherwise not available to M/s JEL as their final product, i.e. electricity, does not fall in the ambit of the GST law.
47. Assuming that the steam
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h may change at any point of time, thus affecting the uninterrupted supply of such goods. This clearly shows that Principal will not be in a position to bring back the inputs after processing by the proposed job-worker independent of a third person or entity, who in turn is in the role of regulator and there is no option with the Principal but to follow the laid down regulations. So much so, the return of the inputs after processing is not guaranteed if not allowed by the regulator or third person/entity. Further, no one-to-one co-relation can be established vis-a-vis the receipt of the processed goods due to involvement of the third party. Under the facts as brought out above, the condition of the definition of Job Work involving only two persons is not fulfilled. Nor is the condition of the Section 143(1)(a), namely to bring back the inputs to the premises of the principal, fulfilled.
49. The facts of the case cited by the Appellant in the matter of M/s Essar Steel Ltd. said to havi
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rk means goods produced out of materials supplied by customer and where the job workers contribute mainly their labour and skill though done with the help of their own tools, gadgets or machinery – But when the job worker contributes his own raw material to the article supplied by the customers and manufactures different goods it does not amount to job work however addition or application of minor items by job worker would not detract it being a job work – Like a tailor stitching a shirt or suit out of the cloth supplied by his customer, may use his own buttons, thread and lining cloth and such ah activity would amount to job work.”
51. In para 17 of the said judgment, Hon'ble Court has explained the definition of Job work which is reproduced below-
“Now, what does the expression 'job work' mean? On this question, the Explanation is not of much assistance. The Concise Oxford Dictionary assigns several meanings to the expression job' but the relevant meaning having reg
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ers, soles etc. by the customer and the factory applies its own thread or bonding material and manufactures shoes therefrom and supplies them back to the customer, charging only for its work. The nature of its work does not cease to be job-work. Indeed, this aspect has been stressed in all the decisions of High Courts referred to hereinbefore. ”
Thus what we see from the above observations is that, the Supreme Court has held that additions or application of minor items is permissible in job work. But such is not the case here.
Also, In the E-flier published by the CBEC on 'job work', it is mentioned that' the whole ides in job work is to make the principal responsible for meeting compliances on behalf of the job worker of the goods processed by him (job worker) considering the fact that typically the Job workers are small persons who are unable to comply with the discrete provisions of the law. Therefore, we hold that job work on the scale as in this case before us could
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an nevertheless be seen from the details provided by the appellant that coal is not the only input used for the production of electricity. There is large quantity of water and air being uitilized in the process. The other materials being used by the job worker are not minor solutions to the Inputs and all Inputs are not provided by the principal. Accordingly It Is seen that the process cannot be considered as Job work following the ratio of the above judgment.
53. To elaborate further, in para 19 of the said judgment, it is observed as below:
” Now, let us look at the process involved in this appeal. All that Modipon does is to supply steel pipes. The appellant purchases guide rings and strengthening rings from the market. It fits these rings Into those steel pipes by itself or gets them fitted In another unit. Thereafter, adopters are fitted on the sides of the cops and then the plastic sleeves are fitted on the cylinders of the cops. This is not a case where the rings and the
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job work if principal sends minor inputs to the job worker and all other inputs/goods utilized in the final product are being procured/purchased by the job worker. This will defeat the very purpose and idea of job work. For example, the process where a principal sending only buttons and thread to a job worker to get the shirts manufactured by the job worker by utilizing the fabric purchased by the job worker cannot be considered as job work-in light of the above judgment of Apex Court. Similarly, In the Instant case If M/s JSL sent only water tankers to M/s JEL and received back Electricity from them on payment of job charges and cost of other raw materials like coal and air, had the process would have been called as a job work process? We are of the firm opinion that the answer is negative in view of the Apex Court judgment as only minor additions by the job worker on the inputs provided by the principal is envisaged in the law.
54. The various judgments relied upon by the Appellant
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he steel plant and after utilization of the some of it, remaining electricity was transmitted to the grid of Gujarat State Electricity Board. So, there was no regulation or third party on the inputs to reach the Principal after processing of the same.
(ii) Commissioner of C. Ex. Nagpur v/s IndoramaTextiles Ltd. 2010(260)ELT 382(Bom.):
The principal argument here was that furnace oil was never received in the factory of production but sent directly to the job worker and as Indo Rama Textiles did not have a captive power plant, CENVAT credit was not available. The SC referred to the earlier decision In Vikram cement (2006(194 ELT 3) (SC) and held that 'within the factory of production' can be interpreted liberally Therefore, it be noted that the primary issue here was not whether the activity is a job work or not. Also, it was never contended by the revenue that the said activity is not job work so the Court had no occasion to decide the same ( Para 8 of the order). As such t
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ase of Haldia petrochemicals the question was of the eligibility of Cenvat credit on inputs used in the generation of team and electricity. The Naphtha was sent to a power plant (which was a joint venture of Haldia with Larsen and Toubro) .The credit was sought to be denied on the ground that the that duty is only allowed on inputs used in generation of electricity or steam used for manufacture of the final product within the factory of production. This issue is not relevant as in the present case.
The other issue was whether credit is allowed on the basis that the products are supplied to job worker namely the power plant. So as such the issue was of admissibility of credit. Also the definition of 'input' during the relevant time covered goods used in fuel or for generation of electricity, which was the basis on which the judgement was given, as is clearly evident from Paragraph 22 of the order.
Also, as per para 2 of the said judgment “The principal raw material for manuf
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) ELT 213 Tri Mumbai/
c) Jaypee Rewa Cement vs Commissioner Of Central Excise (133 ELT 3 (sc),
d) Collector of Excise vs Solaris Chemtechf 2007 214 ELT 481 (SC)/
e) Gujarat State Fertilizers ( 2008 229 ELT 9 SC)/
f) Grasim Industries 2002 (147 ELT 190)
the Issue whether a particular activity is a job work or not was at all not before the Court. The only issue was of admissibility of credit.
The appellant has also relied on the Advance Ruling issued by Gujarat Authority For Advance ruling on dt. 21.03.2018 vide No. GUJ/GAAR/R/2018/7 In the matter of M/s INOX Air Products Pvt. Ltd. The facts of that case are different from the facts and circumstances of the instant case. M/s Inox Air Products Pvt. Ltd. were providing services of Job work to the principal M/s Essar from the plant located within the premises of the Principal and all the inputs viz. Atmospheric Air, Industrial water and Electricity used for manufacture of Industrial gases belonged to the principal and were suppl
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han steam coal?
(ii) How would the Principal, M/s JSL be able to bring back the inputs (after processing the same by job worker) under Section 143(1)(a) without being regulated by a third party?
(iii) What are the other inputs/materials, their quantity and value, being procured/purchased by the job worker, M/s JEL, which need to be added to the inputs supplied by the Principal for converting the same into electricity, as the Principal is not supplying all the inputs and in terms of the Judgment of Apex Court, as referred above, the job worker can not make substantial addition to the inputs of the Principal to qualify for the process as job work.
In light of above, we have no doubt to conclude that the activity undertaken by M/s JEL to convert Coal, to be supplied by M/s JSL, in electricity is not covered under the definition of Job work in terms of the CGST Act. Since goods supplied by M/s JSL will be utilized by M/s JEL in manufacture of new commodity i.e. electricity (though att
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