2019 (12) TMI 1007 - AAR - GST

Application for Advance Ruling Denied: GST Liability on Vendor's Scrap

The Authority rejected the application for advance ruling as non-maintainable, ruling that the liability to pay GST on scrap generated at the vendor's ... Advance ruling - maintainability of application under Section 95 - scope of jurisdiction of Authority for Advance Ruling - taxability of supply - supplierAdvance ruling - maintainability of application under Section 95 - scope of jurisdiction of Authority for Advance Ruling - taxability of supply - supplier - Whether the Advance Ruling Authority can adjudicate on who is liable to pay GST on scrap generated at a subcontractor's premises when the applicant is not the supplier of that scrap. - HELD THAT: - The applicant contracts out manufacture to vendors and pays labour charges part in cash and part by transferring scrap, which the applicant acknowledges becomes the vendors' property. Section 95 confines the Authority's power to give advance rulings to matters relating to supplies of goods or services being undertaken or proposed to be undertaken by the applicant. Since the supply (if any) of the scrap is not undertaken or proposed to be undertaken by the applicant but by the vendors, the question of taxability of that scrap falls to the vendors and is outside the ambit of a ruling in respect of the applicant. Consequently the application does not fall within the matters on which this Authority may rule and is not maintainable. [Paras 5]Application for advance ruling is not maintainable and is rejected.Final Conclusion: The Authority declined to answer the question because the supply of scrap is not by the applicant; the advance ruling application is rejected as non maintainable. Issues Involved: Determination of the party liable to pay GST on scrap generated from labor jobs at the vendor's place.Analysis:1. Facts and Contention - As per the Applicant: The applicant, a registered person under the GST Act, sub-contracts the manufacture of products to vendors on labor job basis. The applicant pays the vendors for labor, which includes the value of scrap generated during manufacturing. The payment to vendors is a combination of cash and barter (scrap). The applicant queries whether this procedure complies with the law.2. Contention - As per the Concerned Officer: No submissions were made by the jurisdictional officer.3. Observations and Findings: The Authority noted that the applicant subcontracts manufacturing to vendors who are paid for labor. Scrap is generated during this process, with the applicant claiming that the labor charges paid are less than the actual charges due, with the difference representing the value of the scrap. The applicant asserts that the scrap becomes the property of the vendors. The Authority highlighted that the applicant is not undertaking the supply of the scrap, as it becomes the vendor's property, thereby falling outside the purview of the GST Act.4. Legal Analysis: The Authority referred to the provisions of Chapter XVII of the CGST Act and Sections 95 to 98, 102, 103, 104, and 105. Section 95 defines 'advance ruling' as a decision provided by the Authority to the applicant on matters specified in Section 97(2) concerning the supply of goods or services. As the scrap becomes the vendor's property, any tax implications related to the sale of the scrap would be the vendor's responsibility, not the applicant's. Therefore, the Authority concluded that since the supply of scrap is not undertaken by the applicant, the question raised falls outside the scope of Section 95 of the CGST Act.5. Decision: The Authority rejected the application for advance ruling as non-maintainable, as the question regarding the liability to pay GST on the scrap generated at the vendor's place was deemed to be outside the purview of the applicant's responsibilities under the GST Act.This detailed analysis of the judgment provides a comprehensive understanding of the issues involved, the contentions of the parties, the legal provisions considered, and the final decision rendered by the Authority for Advance Ruling in Maharashtra.