In Re: M\/s. JSW Energy Ltd.
GST
2018 (5) TMI 763 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – 2018 (13) G. S. T. L. 92 (A. A. R. – GST)
AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – AAR
Dated:- 5-3-2018
GST-ARA-05\/2017\/B-08
GST
B.V. BORHADE AND PANKAJ KUMAR (MEMBER)
\nMAHARASHTRA AUTHORITY FOR ADVANCE RULING
\n(constituted under section 96 of the Maharashtra Goods and Services Tax Act, 2017)
\nPROCEEDINGS
\n(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
\nNO.GST-ARA-05\/2017\/B-04
\nMumbai, dt.05\/03\/2018
\nThe present application has been filed under section 97 of the Central Goods and Services Tax Act 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act”] by Ms. JSW Energy Limited, the applicant, seeking an advance ruling in respect of the applicability of GST on:
\n1. Supply of coal or any other inputs on a job work basis by JSL to JEL
\n2. Su<\/p>\n
= = = = = = = =<\/p>\n
Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n CJ8109N1Z8 is engaged in the business of generation of power. The Applicant's power plant is divided into four units. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ination before the Authority for Advance Ruling ('AAR') is the applicability of GST on: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n of Job Work or otherwise, within one year of their being sent out, to any place of business of the Principal. Fulfilment of such a condition would allow movement of inputs between the said entities without payment of taxes. For the said purpose, inputs include intermediate goods arising from any treatment or processes carried out on the inputs by the Principal or the Job Worker. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n of the CGST Act pertains to valuation of taxable supplies, which would be the transaction value, i.e. the price actually paid or payable for the said supply of goods or services or both where the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply. For the said purpose, the term 'related person' shall cover: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n edit of the GST payable on charges paid to JEL (subject to the underlying provisions of the GST legislation). Accordingly, the value attributable to the Job Work charges could be construed as the transaction value for levy of GST. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n l Inputs delivered to JEL its transfer is lawful, and at the time of delivery such Inputs will be free and clear of any lien, claim. demand, security Interest or other encumbrance. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n he above are only relevant extracts from the underlying Job Work Agreement which have been reproduced to substantiate the arrangement of the Principal and the Job Worker. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n efined under the GST laws, reliance is placed on various dictionary meanings and judicial precedents in this regard: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 9; as under: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n rdingly, the activity undertaken by JEL on behalf of JSL would be classifiable as a Job Work activity. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n put services used by Wind mills to generate energy which is made available to the manufacturer through power board under the barter system, has been allowed. The Tribunal at Chennai in the matter of DCW Ltd vs. Commissioner of C.Ex, Triunelveli [2016 (332) ELT 142(Tri-Chennai) = 2015 (10) TMI 1929 – CESTAT CHENNAI land in the matter of The India Cements Ltd and Others vs CCE , Salem and Others [2015-TIOL-(982-CESTAT-MAD] = 2015 (6) TMI 580 – CESTAT CHENNAI also followed the above principle. Relevant extract of the India Cement Ltd case is reproduced as follows: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n humbly submits that a job work arrangement would be in the nature of a supply of service. Entry 3 of the said schedule is reproduced as follows: = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n quired to bring back inputs after completion of job work or otherwise, within a period of one year of they being sent out without payment of tax. In the said context, the Applicant has submitted under paragraphs 4. 10 to 4.12 of this Application that the subject transaction is in accordance with the prescribed conditions of the job worker arrangement whereby inputs (i.e. coal) is being returned to the Principal. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n trued accordingly = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ndling 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 malarial and it need not be a process involving the use of material… = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n s called 'principal'. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n se of a job work activity would be governed by Section 143 and subjected to the conditions mentioned therein. Further the Company humbly submits that the legislature does not exclude related parties from entering into a job work arrangement, = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n payable only on the Job Work charges charged by the Company.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ccordance with the provisions of this clause unless the said principal declares the place of business of the job worker as his additional place of business except in a case- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n above legal provisions read together, it implies that in job work the job worker can undertake any treatment or process on goods belonging to another registered person and after job work such goods must necessarily be returned to the principal. In another words the goods supplied by the principal to be treated and processed upon by the job worker and processed goods to be returned to the principal- Though in the definition of job work it is specified that the job worker can undertake any process or treatment, the provisions governing the job work procedure are the deciding factor to qualify whether any process or treatment amount to job work. And the basic underlying principal of job work is that the goods sent for job work may be subjected to any process or treatment but said goods after such treatment\/process must be returned to the principal. Both the definition of Job Work given in Section 2(68) of CGST Act, 2017 and the procedure in Section 143(a) of the CGST Act, 2017 should be <\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n be returned back to the principal coal ash\/residue can not be deemed as processed goods. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n e transaction which would be on the lines thus- = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n pply of power by JEL to JSL = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n al or any other inputs and after processing these, the output is electricity which is supplied to JSL. As an immediate observation, we have to say that the goods sent for job work are coal and after the so claimed process of 'job work' by JEL, the new product 'electricity' comes into existence. It is very apparent that the goods which are received after job work are in no way identifiable with the goods which were sent for job work. Electricity is a totally new commodity which will be delivered to JSL. To ascertain whether conversion of coal into electricity would tantamount to being 'job work', we need to examine the relevant provisions under the GST. We find that the definition of job work under GST Act is as under – = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n to unacceptable consequences. It is not the intend to treat and regard manufacturing activities as processing. Manufacturing, as is understood, means a series of processes through different stages in which the raw material is subjected to change by different operations, (For difference between process and manufacturing see CIT v. Tara Agencies [CIT v. Tara Agencies, (2007) 6 SCC 429], = 2007 (7) TMI 4 – SUPREME COURT OF INDIA Orient Paper and Industries Ltd. v. State of M.P. [Orient Paper and Industries Ltd. v. State of M.P., (2006) 12 SCC 468] = 2006 (11) TMI 320 – SUPREME COURT OF INDIA and Aspinwall Co. Ltd. v CIT [Aspinwall & co. Ltd. v. CIT, (2001) 7 SCC 525].) = 2001 (9) TMI 3 – SUPREME Court = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n t is liable to pay electricity tariff at a lower rate. The intent and purpose is certainly not to compel and force a manufacturing unit being set up at an acceptable distance from the mine, for the manufacturing unit adjacent to the mine would have to pay electricity tariff at a higher rate. Pertinently, a manufacturing unit set up by another entity, whether adjacent to the mine or not, would pay a lower tariff Such absurdity and irrationality has to be avoided. In the present context, we would, therefore, hold “processing” would mean activities in order to make the mineral mined marketable, saleable and transportable, without substantially changing the identity of the mineral, as mined When there is a substantial change at the mineral mined and the process results in a different commodity being produced or transforming and completely changing the mineral, it would fall outside the scope of the word “processing”. The restricted construction will also be acceptable in view of the use of<\/p>\n = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n 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;” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n irit, commonly known as petrol, used in or in relation to the manufacture of final product whether directly or indirectly and whether contained in the final product or not, and includes accessories of the final products the final products cleared along with final products goods used as paint, or as packing material, or as fuel or for generation of electricity or steam used for manufacture of final products or for any other purpose within the factory of production and also includes lubricating oils, greases. cutting oils and coolants.” = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n goods or supply of services as referred to in Schedule II. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n goods on behalf of the principal; or = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n goods and not a 'job work'. And hence, the question does not survive. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" In Re: M\/s. JSW Energy Ltd.GST2018 (5) TMI 763 – AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – 2018 (13) G. S. T. L. 92 (A. A. R. – GST)AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA – AARDated:- 5-3-2018GST-ARA-05\/2017\/B-08 GSTB.V. BORHADE AND PANKAJ KUMAR (MEMBER) MAHARASHTRA AUTHORITY FOR ADVANCE RULING (constituted under section 96 of the Maharashtra Goods and … Continue reading “In Re: M\/s. JSW Energy Ltd.”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-11766","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/11766","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=11766"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/11766\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=11766"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=11766"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=11766"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\n2. JSW Steel Limited (“JSL”), having GST Registration No. 27AAACJ4323N1ZG is engaged in manufacture and supply of steel. JSL requires power on a continuous and dedicated basis, for manufacturing steel at its steel plant. For the said purpose, JSL and the Applicant proposed to enter into an arrangement (herein after referred to as 'Job Work Agreement') pertaining to Unit Ill and Unit IV of the power plant which are in the nature of a captive power plant.
\n3. In terms of the proposed arrangement, JSL would supply coal or any other inputs (herein after collectively referred to as 'inputs') to the Applicant on a free-of-cost basis. On receipt of the same, JEL would undertake certain processes to convert the said inputs into power. In accordance with the Job Work Agreement, the title to the coal or any other inputs along with the power generated from the<\/p>\n
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\nI. Supply of coal or any other inputs on a job work basis by JSL to JEL
\nII. Supply of power by JEL to JSL
\nIII. Job work charges payable to JEL by JSL
\nANNEXURE II – STATEMENT CONTAINING THE APPLICANT'S INTERPRETATION OF LAW AND\/OR FACTS, AS THE CASE MAY BE, IN RESPECT OF THE QUESTION(S) ON WHICH THE ADVANCE RULING IS REQUIRED
\n1. ISSUE FOR DETERMINATION
\n1.1, The questions\/ issues before Your Honor for determination are applicability of GST on:
\na. Supply of coal or any other inputs on a job work basis by JSL to JEL
\nb. Supply of power by JEL to JSL
\nc. Job work charges payable to JEL by JSL
\n1.2. The questions \/ issues placed for determination before Your Honor have to be appreciated in light of the following position of law and its applicability to the proposed activity by the Applicant, discussed hereunder.
\n2. POSITION OF LAW
\nPROVISIONS REGARDING 'JOB WORK' UNDER THE GST REGI<\/p>\n
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\nRelevant extracts of the said Section are reproduced as follows:
\n143. (1) registered person (hereafter in this section referred us the “principal”) may under intonation 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. –
\n(a) bring back inputs, after completion of job work or otherwise, or capital goods, other than moulds and dies, Jigs and fixture, or tools, within one year and three years, respectively, of their being sent out, to any of his<\/p>\n
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\n(i) officers or directors of one another 's businesses:
\n(ii) legally recognized partners in business;
\n(iii) employer and employee.
\n(iv) persons (including legal persons) who directly or indirectly owns, controls or holds twenty-five per cent or more of the outstanding voting slack or shares of both of them;
\n(v) one of them directly or indirectly controls the other:
\n(vi) bath of them are directly or indirectly controlled by a third person:
\n(vii) together they directly or indirectly control a third person: or they are members of the same family;
\nJSL and JEL would be treated as related persons on account o<\/p>\n
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\n3. RELEVANT CLAUSES OF THE AGREEMENT BETWEEN JEL AND JSL
\nIllustrative clauses, which would be a part of the contractual agreement are given below:
\n3.1. Key Definitions
\nInputs – inputs means Coal, or any other supplies that are required by JEL, for provision of Job Work services in terms hereto, the agreed grade, characteristics and specifications of Inputs to he delivered by JSL, under this Agreement are at Annexure
\nJob Work Services- means the activity of processing Inputs supplied by JSL produce Products], being more particularly described in Annexure, pursuant to this Agreement and the relevant Instructions.
\nPower – Power shall mean electrical output generated in MW terms.
\nProduct- Product includes power – in addition to the fly ash and other result<\/p>\n
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\nJSL Shall retain title to and risk of loss with respect la the Inputs supplied to JEL.
\n3.5. Loading and Delivery
\nJSL shall supply the Inputs, as may he agreed between the Parties at such time as would enable JEL to comply with the Instructions Delivery Procedures and detailed operational procedures to ensure smooth delivery to and loading of Inputs shall be agreed in writing between the authorised representatives of the parties.
\n3.6. Measurement of Quantity
\nThe quantity of Inputs supplied shall be as weighed on JSL's 's [electronic weighbridges]. A representative of JEL may be present to witness the weighment. If the [weighbridges] fail, weight will he determined on mutually agreed volume to weight conversion basis.
\nJEL at its expense, shall procure, install, own and maintain two sets of Metering <\/p>\n
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\n4. SUBMISSIONS OF THE APPLICANT
\n4.1. At the outset, it is submitted that traditionally the concept of job work, which has evolved over the period clearly signifies that the same involves undertaking certain processing activities in respect of the goods supplied by the Principal, resulting in intermediate\/ finished product. A Job Worker typically works on behalf of and for the owner of goods on which the Job Work is being undertaken who is also termed as Principal.
\nTHE ACTIVITY UNDERTAKEN BY THE APPLICANT FALL WITHIN THE AMBIT OF THE TERM 'JOB WORK' AS DEFINED UNDER THE CGST ACT
\n4.2. As per the provisions of the CGST Act mentioned above in paragraph 2.1, for treatment or process undertaken by a person to be termed as a 'Job Work', the said treatment or process should be undertaken on the goods belon<\/p>\n
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\n* GST v. Samodar Padmanath Rao [1968 (22) STC 187 (Bom)]: = 1968 (2) TMI 102 – BOMBAY HIGH COURT “One of the meanings that can be given to the word 'process' is subject to a particular method or technique of preparation handling, or other treatment designed to affect a particular result”
\n* Haldia Petrochemicals Ltd. v. Commissioner of C.Ex., Haldia [2006 (197) E.L.T. 97 (Tri.. Del.)] = 2005 (1) TMI 306 – CESTAT, NEW DELHI: In this case, it has been held that the term 'processing' a much wider term
\n “ln the expressions “further processing” and “any other purpose” mentioned in Rule 4(5)(a) are fairly wide and would take their colour from the processes mentioned in the definition of 'input'. As such the generation of power or steam as intermediate products would fall the scope of these expression, and would amount to the Job Work”
\n* S.B. Sarkar's Wor<\/p>\n
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\n“(52) “goods” means every kind of movable properly other than money and securities but includes actionable growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply”
\n4.6. As mentioned above, in the present case, the inputs used by the Applicant for generating power are coal or any other inputs which are supplied by JSL and consumed for the generation of power. Coal or any other inputs used by the Applicant for generation of power are movable property. Therefore, in the present case these inputs i.e. coal or any other inputs can be considered as a 'goods'.
\nGOODS USED FOR GENERATION OF POWER BY run APPLICANT BELONG TO JSL
\n4.7. In terms of the third condition, the goods should belong to JSL and should be provided to the Applicant for undertaking the activity of generation of power. Reference is also sought to the agreement between JEL and JSL, the relevant clauses of which have been s<\/p>\n
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\n4.9 The Applicant submits that there is no iota of doubt that the coal and the other inputs belongs to JSL and the ownership of the same always remain with JSL only.
\nBRINGING BACK THE INPUTS
\nUnder the GST regime, the condition pertaining to return of inputs to the Principal is mentioned in paragraph 4.2. The same is in the line with the erstwhile CENVAT Credit Rules, 2004. For a better understanding of the scope of this condition, reference Gg to the judgment Of the Apex Court in the matter of Prestige Engineering (India) Limited vs Collector of Central Excise, [1994 (73) ELT 497 (S.C.)] = 1994 (9) TMI 66 – SUPREME COURT OF INDIA where the Supreme Court observed that initiating upon the same articles being returned to the customer after undergoing the manufacturing process at the hands of the Job Worker may rob the notification of any substance whatsoever'. The above principle was<\/p>\n
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\nOur view above is fortified from the judgment of the Hon'ble High Court of Bombay in Central excise appeal No. 14\/012 in the case of CCE, Aurangahad Endurance Technology disposed 02.12.2014. The Hon'ble Court examining the meaning of 'input' under Cenvat Credit Rules, 2004 and admissibility of credit of tax on such input held that there should not be inadmissibility of input credit on input or input services used by<\/p>\n
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\n'Any Treatment or process which is applied to another person's goods is a supply of services.'
\n4.14. On the basis of the above, it is respectfully submitted that for the generation of power from coal, the following processes are undertaken by the Applicant:
\n* A machine called a pulverizer grinds the coal into a fine powder.
\n* The coal powder mixes with hot air, which helps the coal burn more efficiently, and the mixture moves to the furnace.
\n* The burning coal heats water in a boiler, creating steam.
\n* Steam released from the boiler powers an engine called a turbine, transforming heat energy from burning coal into mechanical energy that spins the turbine engine
\n* The spinning turbine is used to power a generator, a machine that turns mechanical energy into electric energy. This happens when magnets inside a copper coil in the <\/p>\n
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\n4.17. For determining the applicability of GST on Job Work charges, reference is sought paragraphs 4.13 and 4.14 of this document. In the said context, it is humbly submitted that a job worker is engaged in supplying a service specified under Schedule II of the CGST Act and accordingly GST would be applicable on the said job worker charges.
\n4.18 In addition to the above, for the purpose of determining the value of job work charges subject to GST, reference is sought to Rule 28 of the CGST Rules mentioned under paragraphs 2.9 and 2.10 of this application, which pertains to val<\/p>\n
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\nBasis the aforesaid definition, any 'treatment' or 'process' undertaken on goods belonging to another person Shall be construed as a job work activity.
\n1.2 Since the terms 'treatment' or 'process' have not been defined under the GST legislation, reference is sought to the dictionary mining which explain the said terms and are reproduced as follows:
\nProcess:
\n* a natural or involuntary operation or series of changes; handle or deal with by a particular process'
\n* a systematic series of actions directed to some end;
\nTreatment:
\n* Submission to the action of a chemical, physical or biological agent”
\n* subjection to some agent or action”
\n1.3 In addition to the above, reference is also sought to judicial precedents wherein the aforesaid terms have been explained. In the matter of Collector of Central Excise vs Rajasthan State Chemicals Works – 1991 (55) E.LT. 444 (SC), = 1991 (9) TMI 73 – SUPREME COURT OF INDIA the Supreme Court exam<\/p>\n
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\n1.4 In light of the above cited meanings and judicial interpretation, it is submitted that the term process is wide enough to cover even a mere handling of materials. Considering the scope of the said term, the Company humbly submits that the activities proposed to be carried out by the Company would fall within the ambit of the term 'process' or treatment'.
\n1.5. In addition to the above, the other pre-requisite for categorizing the proposed activity as a 'job work' would be the said treatment or process is required to be undertaken on goods belonging to another person. As per the proposed arrangement, coal would be supplied by the Principal (i.e. JSW Steel Ltd) to the Company for the purpose of carrying out the specified processes for genera<\/p>\n
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\nThis 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 work itself reflects the change in basic scheme of taxation relating to job work in the proposed GST regime.
\n2.2. Based on the above, the Company humbly submits that the tax authorities have sought to differentiate the ambit of the term job work as existing under the GST regime, when compared to the pre-GST era. Under the GST regime, the definition seeks to cover a wider scope of services provided by the job worker, However, the Company humbly submits that its proposed activities would squarely be covered under the definitions of the term job work as existing under the pre-GST regime and accordingly the same should not be interpreted in a restrictive manner under the GST legislation.
\n3. P<\/p>\n
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\n4. APPLICABLE JUDICIAL PRECEDENTS
\n4.1. Without prejudice to the above submissions, the Company humbly submits before Your Honor certain judicial precedents wherein the facts arc squarely applicable to the present application. These can be cited as follows:
\n* Commissioner Central Excise vs Indorama Textiles Ltd. [2010 (260) ELT 382 (Bom HC)] = 2009 (10) TMI 571 – BOMBAY HIGH COURT
\n* Haldia Petrochemicals Ltd. vs. CCE, Haldia [2006 (197) ELT 97 (Tri-Delhi) = 2005 (1) TMI 306 – CESTAT, NEW DELHI
\n* Sanghi Industries Limited vs CCE, Rajkot [2006(206) ELT 575 (Tri-Delhi)] = 2006 (4) TMI 422 – CESTAT, NEW DELHI
\n* Sanghi Industries Limited vs CCE, Rajkot [2014 (302) ELT 564 (Tri.-Ahmd.)] = 2014 (2) TMI 278 – CESTAT AHMEDABAD
\nA copy of the aforesaid <\/p>\n
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\n03. CONTENTION – AS PER THE CONCERNED OFFICER
\nThe submission, as reproduced verbatim, could be seen thus-
\nSUPPLY OF COAL OR ANY OTHER INPUTS ON A JOB WORK BASIS BY JSL TO JEL
\nJSL intend to supply the inputs 'coal' to JEL on job work basis to convert coal into electrical energy and pay job-work charges to receive electricity from JEL
\nThe term 'job work' has been defined under Section 2(68) of the CGST Act, 2017 as
\n“job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression jab-worker shall be construed accordingly.
\nAnd the provisions governing job work procedure are set out in Section 143 of the CGST Act, 2017. Therefore the scope and meaning of the term 'job work' has to be decided by taking into account provisions governing the job work procedure.
\nJob work procedure.
\n143. (1) A registered person (hereafter in this section re<\/p>\n
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\n (i) where the job worker is registered under section 25; or
\n (ii) where the principal is engaged in the supply of such goods as may be notified by the Commissioner.
\n(2) The responsibility for keeping proper accounts for the inputs or capital goods shall lie with the principal.
\n(3) Where the inputs sent for job work are not received back by the principal after completion of job work or otherwise in accordance with the provisions of clause (a) of sub-section (1) or are not supplied from the place of business of the job worker in accordance with the provisions of clause (b) of sub-section (1) within a period of one year of their being sent out, it shall be deemed that such inputs had been supplied by the principal to the job worker on the day when the said inputs were sent out.
\n(4) Where the capital goods, other<\/p>\n
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\nOne illustrative example of job work on coal is conversion of coal into Coke. Coal can be subjected to destructive distillation to be converted into Coke. This process satisfies the definition of 'job-work' as well as the governing provisions stipulated u\/s 143 are followed. Unlike the instant case where Coal is consumed in the boiler to generate steam which in turn is used in the generation\/manufacture of a new commodity 'electricity' falling under CSH No 2716 0000. And the new commodity 'electricity' is supplied back to the principal. It is expected in job work that goods supplied by the principal undergo 'treatment\/process' at job worker's end and after such treatment\/job work they are returned to the principal. The process undertaken by JEL traverse well beyond the scope of the term 'job work'. It is more than job work.
\nThis office is of the view t<\/p>\n
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\n * JSW Steel Limited (JSL) and JSW Energy Limited (JEL), as the applicant informs, are related persons on account of direct or indirect control over each other.
\n * JEL, the applicant, is engaged in the business of generation of power. The applicant's power plant is divided into four units.
\n * JSL is engaged in the manufacture and supply of steel. JSL requires power on a continuous and dedicated basis, for manufacturing steel at its steel plant. For the said purpose, JSL and JEL proposed to enter into a Job Work Agreement pertaining to Unit III and Unit IV of the power plant which are in the nature of a captive power plant.
\n * In terms of the proposed agreement, JSL would supply coal or any other inputs to JEL on a free-of-cost basis. On receipt of the same, JEL would undertake certain processes to convert the said inputs into power. In accordance with the Job Work Agreement, the title to the coal or any other inputs along with the<\/p>\n
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\n 3. Job work charges payable to JEL by JSL
\nWe proceed with the issue thus –
\nThe applicant before us is JEL. We refer to the GST Act to understand the mechanism of an Advance Ruling wherein clause (a) of section 95 says that –
\n“95. In this Chapter, unless the context otherwise requires,-
\n(a) “advance ruling” means a decision provided by the Authority or the Appellate Authority to an applicant on matters or on questions specified in sub-section (2) of section 97 or sub-section (1) of section 100, in relation to the supply of goods or services or both being undertaken or proposed to be undertaken by the applicant;
\nAs can be seen the ruling is in respect of the supply undertaken or proposed to be undertaken by the applicant. If this is the case then we see that the question no.1 as posed before us pertains to supply by JSL and not JEL, the applicant. In view thereof, the same cannot be entertained by us. Further, during hearing, the applicant has also acce<\/p>\n
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\n“(68) “job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly:
\nAs can be seen the definition calls for application of a treat<\/p>\n
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\n21. The words “crushing”, “treating” and “transporting” are words of narrower significance and the word “processing” used between these words should not be given a very wide meaning, for the legislative intent, according to us, is narrower. The word 'processing' would take its meaning <\/p>\n
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\nAs 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', *Process' and 'Manufacture' are three different activities recognized by the Legislature. The intent of the Legislature is to restrict the scope of 'job work' to 'treatment' or 'proces<\/p>\n
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\nAs can be seen, the processes involved in the above cases required that the inputs used may or may not have been found in the final product. The facts before us and the applicable provisions are different than those found in the case laws relied upon by the applicant. Further, we observe that the facts and applicable provisions being unambiguous, we do not feel the need to comment or discuss the other case laws and provisions as relied upon by the applic<\/p>\n
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\n(2) Notwithstanding anything contained in sub-section (1),-
\n (a) activities or transactions specified in Schedule III; or
\n (b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council, shall be treated neither as a supply of goods nor supply of services.
\n(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as-
\n (a) a supply of goods and not as a supply of services; or
\n (b) a supply of services and not as a supply of goods.
\nIt can be seen that sub-section (2) begins with the word “notwithstanding” and sub-section (3) begins with the words “Subject to the provisions of sub-sections (1) and (2)”. The way the sub-sectio<\/p>\n
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\n(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
\n4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.”
\nPara 2 of the Schedule I is about supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business. Further, the Explanation to section 15 explains 'related persons' thus –
\n“Explanation.-For the purposes of this Act,-
\n(a) persons shall be deemed to be “related persons” if-
\n (i) such persons are officers or directors of one another 's businesses;
\n (ii) such persons are legally recognised partners in business;
\n (iii) such persons are employer and employee;
\n (iv) any person directly or indirectly owns, controls or holds twenty-five percent. or more of the outst<\/p>\n
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\nIn view of all above deliberations, the questions can be answered thus –
\n05. In view of the extensive deliberations as held hereinabove, we pass an order as follows :
\nORDER
\n(under section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017)
\nNO.GST-ARA-05\/2017\/B-08
\nMumbai, dt. 05\/03\/2018
\nFor reasons as discussed in the body of the order, the questions are answered thus –
\nQ.1 Applicability of GST on supply of coal or any other inputs on a job work basis by JSL to JEL
\nA. This question pertains to supply JSL and not JEL, the applicant. In view thereof, the same is not entertained.
\nQ.2 Applicability of GST on supply of power by JEL to JSL.
\nA. This question is answered in the affirmative.
\nQ.3 Applicability of GST on job work charges payable to JEL by JSL.
\nA. The transaction between JEL and JSL is a transaction of supply of goods and not a 'job wo<\/p>\n
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