AI Drafter 
TaxTMI 
TaxTMI 
2018 (6) TMI 518
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....h the applicant acts as a job worker for M/s. Essar. 2.1 M/s. Essar undertakes to provide the necessary goods such as Electricity, Industrial quality water to the applicant on a free-of-cost basis, using which the applicant manufactures industrial gases (Oxygen, Nitrogen and Argon) for Essar on Job Work basis. It is submitted that the arrangement is on a job work basis, accordingly, the title to the electricity and industrial water remains with M/s. Essar and M/s. Essar is also the owner of the gases manufactured by the applicant using the said electricity and water. 2.2 It is submitted that the gases so produced are further captively consumed by M/s. Essar in its steel manufacturing operations. In order to ensure continuous availability of the gases, the applicant's gas plant is located at a designated land within the premises of the Steel Plant. The applicant has obtained a separate GST registration for this premises. 2.3 The mechanics of the transaction and consideration payable by M/s. Essar to the applicant for the manufacture and supply of gases is as follows :- a. The applicant will raise a daily invoice for the fixed and variable job work charges for each ....
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....8) of the Central Goods and Services Tax Act, 2017 (herein after referred to as the 'CGST Act, 2017') ? (ii) What is the value on which the applicant is liable to pay GST ? 3. The applicant has referred to various provisions of CGST Act, 2017 with respect to job work, supply and valuation. The applicant has also referred to various clauses of agreement between them and M/s. Essar. 4.1 As regards the issues whether the activities undertaken by the applicant amounts to job work as defined under Section 2(68) of the CGST Act, 2017, it is submitted that traditionally, the concept of job work, which has evolved over the period, clearly signifies that job work involves undertaking certain processing activities in respect of the goods supplied by the principal, resulting in intermediate / finished product. A job work typically works solely on behalf of and for the principal. It is submitted that in the present case, the applicant uses its air separation plant to separate the Oxygen, Nitrogen and Argon by liquefying and separating the atmospheric air. Accordingly, it is pertinent to note that activity of manufacture of gases by Air Separation Unit ('ASU') requires three prim....
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....ndertaken by the company should qualify as a 'treatment or process', (b) The treatment or process undertaken should be on goods i.e. the raw materials/ inputs involved in the present cases should fall within the ambit of term 'goods, (c) The goods should belong to 'Essar'. 4.3 The applicant submitted that as the terms 'treatment' or 'process' have not been defined under the GST laws, reliance is placed on various dictionary meanings and judicial precedents in this regard. They referred to decisions in the case of CST Vs. Samodar Padmanath Rao [1968 (22) STC 187 (Bom)] and Haldia Petrochemicals Ltd. Vs. Commissioner of Central Excise, Haldia [2006 (197) E.L.T. 97 (Tri.-Del.)]. They also referred to S.B. Sarkar's Word & Phrases of Excise, Customs & Service Tax, 4th Edition, wherein it is mentioned that process means 'prepared, handled, treated or produced by a special process'. They also referred to Websters Dictionary, wherein it is mentioned as 'processing means to subject to some special process or treatment; to subject (esp. raw material) to a process of manufacture, development or preparation'. The applicant submitted that considering the above, it can be co....
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....reement. As regards the 'Air' used by the applicant for manufacture of the industrial gases, they submitted that the following aspects need to be examined to conclude on the issue of ownership of the air viz. (i) statutory position; and (ii) position under the commercial arrangement. They submitted that it is a settled position in law that the owner of land is also the owner of the vertical column of air above the land. This position derives from the Latin maxim cuius est solum, eius est usque ad coelum et ad inferos, and has been legislatively recognized under the Indian Easements Act, 1882 at Section 7 thereof. It is submitted that the said provision clearly states that the ownership of land includes ownership of the air vertically above the land and this principle has also been judicially accepted in a plethora of decisions. In light of the settled principle of law, the ownership of land extends to the ownership of the air vertically above it, accordingly, the air (above the land which is owned by Essar), clearly belongs to M/s. Essar. It is further submitted that in terms of the arrangement between the parties, M/s. Essar is required to provide land and all other inputs f....
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.... can be determined in accordance with Section 15(1) of the CGST Act, 2017 i.e. transaction value. Therefore, there is no need to determine the value in accordance with Chapter IV of the CGST Rules. 5.3 It is further submitted that the transaction value is the price actually payable or paid and in the present case, the price actually paid or payable is the job work charges, therefore, GST in the present transaction would be payable only on the job work charges paid by M/s. Essar to the applicant. 6. The applicant also submitted that they only process the goods supplied by M/s. Essar to manufacture those goods into industrial gases. The activity of processing applied to another person's goods is a supply of service by virtue of Section 7(1)(d) read with Entry 3 of Schedule II of the CGST Act, 2017 which provides that 'any treatment or process which is applied to another person's goods is a supply of services'. Accordingly, the process undertaken by the applicant in the present case on the goods belonging to M/s. Essar would be considered as a 'Supply of Service' and GST on the said transaction would be payable only on the processing charges collected by the applicant from M/s. ....
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.... of Essar only, it has been informed that as per Section 2(52) of the CGST Act, 2017, the 'goods' means every kind of movable property other than money and securities but includes actionable claim, 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. The industrial gases in this case are admittedly manufactured by separating the 'Atmospheric air' which is main input and is not in possession of M/s. Essar and the 'Atmospheric air', therefore, is not a property of M/s. Essar that can be transferred or given to the applicant for manufacturing industrial gases from it. Even the electricity is not the goods, supplied by M/s. Essar, on which any treatment or process is undertaken by the applicant to manufacture industrial gases. Therefore, the activity of the applicant does not meet the definition of 'job work' given in the CGST Act, 2017 as it does not involve any treatment or process on goods belonging to another registered person. It is evident that the applicant is involved in an activity which is not job work but manufacture and supply of a completely new item i.e. industrial gases whic....
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....he said Acts as follows :- "goods" means every kind of movable property other than money and securities but includes actionable claim, 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; 11.2 As submitted by the applicant, Atmospheric Air, Industrial Water and Electricity is required to manufacture industrial gases viz. Oxygen, Nitrogen and Argon. Atmospheric Air and Water being movable property, falls within the definition of goods. As regards electricity, the applicant has relied upon the decision of the Hon'ble Supreme Court of India in the case of Commissioner of Sales Tax, M.P., Indore Vs. M.P. Electricity Board, Jabalpur [1970 (25) STC 188], wherein it has been held as that - "The definition in terms is very wide according to which "goods" means all kinds of movable property. Then certain items are specifically excluded or included and electric energy or electricity is not one of them. The term "movable property" when considered with reference to "goods" as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric energ....
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....hese expressions, and would amount to job work" (c) S.B. Sarkar's Word & Phrases of Excise, Customs & Service Tax, 4th Edition : Process means "Prepared, handled, treated or produced by a special process" (d) Websters Dictionary : "Processing means to subject to some special process or treatment; to subject (esp. raw material) to a process of manufacture, development or preparation." 12.3 The applicant carries out activity of manufacturing industrial gases viz. Oxygen, Nitrogen and Argon by undertaking treatment or process on the goods viz. Atmospheric Air and Industrial Water. 13.1 As per the definition of 'Job Work' such treatment or process should have been carried out on the goods belonging to another registered person. 13.2 M/s. Essar is a registered person under the said Acts. As per clause 4.1 of the agreement entered into between INOXAP and M/s. Essar, the main inputs required for the manufacturing activity viz. electricity and industrial water, are to be provided by M/s. Essar to INOXP, free of charge. The said clause 4.1 of the agreement reads as follows :- "4.1 Provision of Inputs 4.1.1 The main inputs required for the Manufac....
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....and air as pass vertically thereto." It is submitted by the applicant that the aforesaid provision clearly stated that the ownership of land includes ownership of the air vertically above the land. This principle has also been judicially accepted in a plethora of decisions. In light of the settled principle of law, the ownership of land extends to the ownership of the air vertically above it. Accordingly, the air (above the land which is owned by ESSAR), clearly belongs to ESSAR. It is also submitted by the applicant that in terms of the arrangement between the parties, M/s. Essar is required to provide land and all other inputs for the processing of gases by INOXAP. Since the owner of the land would own the ambient air above its land, in effect, M/s. Essar has provided the same to INOXAP in terms of the arrangement (along with electricity, industrial water etc.) 13.4 In view of the aforesaid statutory position and commercial arrangement, it is clear that the Atmospheric Air used by the applicant belongs to M/s. Essar. Thus, all the inputs viz. Atmospheric Air, Industrial Water and Electricity belongs to M/s. Essar. 14.1 As all the necessary ingredients of the definitio....
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....value of a supply of goods or services or both shall be the transaction value, which is 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. (2) ...... (3) ...... (4) Where the value of the supply of goods or services or both cannot be determined under sub-section (1), the same shall be determined in such manner as may be prescribed. (5) ...... Explanation. - For the purposes of this Act, - (a) persons shall be deemed to be "related persons" if - (i) such persons are officers or directors of one another's businesses; (ii) such persons are legally recognised partners in business; (iii) such persons are employer and employee; (iv) any person directly or indirectly owns, controls or holds twenty-five per cent. or more of the outstanding voting stock or shares of both of them; (v) one of them directly or indirectly controls the other; (vi) both of them are directly or indirectly controlled by a third person; (vii) toget....