TaxTMI 
TaxTMI 
TaxTMI 
2018 (7) TMI 511
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....d 05.03.2018. FACTS OF THE CASE A. JSW Energy Limited, (hereinafter referred to as "the Appellant") is engaged in the business of power generation and having Goods and Services Tax ('GST') Registration NO.27AAACJ8109N1Z8. B. JSW Steel Limited ("JSL"), having GST Registration No.27AAAG4323N1ZG is engaged in manufacture and supply of steel. The manufacturing activity undertaken by JSL requires power on a continuous and dedicated basis. For the said purpose, JSL and the Appellant (both being related party in terms of the Central Goods and Services Tax Act, 2017 ('CGST Act') propose to enter into an arrangement (hereinafter referred to as the 'Job Work Arrangement') for the purpose of supply of coal and processing of the same into power for captive use by JSL. C. The 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 af....
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....tate 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 commodity and thereby amounting to manufacture. iii. The judgments of the courts, relied upon by the Appellant, in relation to job work under the erstwhile regime have been negated on the premise that all the judgments quoted in the application and the additional written submissions are in the context of input tax credit which is not the issue in the current facts. iv. Since JEL and JSL are related parties, any supplies made between them, even without consideration will be subject to GST. The Impugned Order has not responded on the GST implication in respect of the coal and other inputs supplied by the JSL to Appellant on the basis that the transaction pertains to GST liability of JSL and not of Appellant. Being aggrieved by the Impugned Order, the Appellant has filed the appeal before this appellate authority making prayer to set aside the said impugned order passed by the Advance Ruling Authority and give further order in the facts and circumstances of the case on the following groun....
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....er 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', 'Process' and 'Manufacture' are three different activities recognised by the Legislature. The intent of the Legislature is to restrict the scope of 'job work' to 'treatment' or 'process' and not to extend the same to manufacture. We need not deliberate more on the issue as the emergence of a distinct commodity is very obvious and therefore beyond the applicability of the definition of 'job work' under the GST Act" 4. The Appellant submits that in order to evaluate the terms 'job work' and 'manufacture' reference is made to the....
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....ENVAT 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 work itself reflects the change in basic scheme of taxation relating to job work In the proposed GST regime. " 10. The Appellant further relies on the clarification issued by CBEC wherein it has bee....
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....oys Co India Ltd. vs Union of India (2015 (316) E.LT. 353 (Bom.)) indicating the fact that the job worker can undertake processes which amount to manufacture. The Appellant would also like to refer the decision of Mumbai Bench of Tribunal in Eaton Fluid Power Ltd. V/s Commissioner of C. Ex. Pune (2014 (308) E.L.T. 602 (Tri. - Mumbai)), wherein the Tribunal held that a job work may or may not amount 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 pro....
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....he goods so manufactured to them he takes job charges i.e. manufacturing expenses plus his manufacturing profits. In some cases, the job worker also uses some of materials of his own and includes their cost in the job charge. After job work is done the excisable goods so manufactured may also be delivered to their agents, or buyers as per their instructions. Since the duty of excise is on manufacture of excisable goods, irrespective of whether the manufacturer is owner of the goods or not, the job worker has to pay the duty...." 15. In terms of the said decision, a job worker can undertake manufacture of goods on account of others. The activity continues to qualify as a job work activity even if it amounts to manufacture. 16. Basis the clarifications issued by CBEC and above judgments, it 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 manu....
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....e 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 to words used in the definition, the same is either appropriately stated in the definition itself or in any other relevant section of the Act with specific wording to that effect. It is submitted that the CGST Act and the regulations do not in any form or manner stipulate or contemplate to derive a different meaning for the word 'process' when used for 'job work' and when used in 'manufacture' which clearly indicate that the 'process' is to be read without any restrictive meaning. Reference can be made to the definition of 'mixed supply' under the CGST Act which clearly excludes supplies qualifying as 'composite supply'. The definition of 'mixed supply' as defined under Section 2(74) of the CGST Act is reproduced below - "mixed supply" means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not cons....
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....ld 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 enough to cover even a mere handling of materials. Considering the scope of the said term, it is evident that the activities proposed to be carried out by the Appellant would fall within the ambit of the term 'process' or 'treatment' even though it amounts to manufacture. Reliance on the Decision of Hon'ble Supreme Court in Manganese Ore India Limited v. State of M.P. ((2017) 1 SSC 81 ) is Erroneous 26. The Impugned Order considers and hinges on various extraneous factors and aspects, none of which have any bearing whatsoever on the basic legal proposition with respect to th....
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....eeps. 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 'transporting'. The relevant extracts are reproduced below- ".....the word "minerals" used in the aforesaid Explanation under the Act would have reference to the mineral which is mined and is then crush....
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....5); (I) manufacture of handicraft goods. 2.5 - (ia) Services by way of job work in relation to- (a) manufacture of umbrella; (b)... 6 - (ii) Services by way of any treatment or process on goods belonging to another person, in relation to (a) ...(c) 2.5 - (iia) Services by way of any treatment or process on goods belonging to another person, in relation to printing of all goods 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....
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....ods belonging to another registered person and the expression "Job worker" shall be construed accordingly. Thus any process/activity undertaken by a person would qualify as job work if all of the following conditions are fulfilled and consequently the Principal will be allowed to send the goods without payment of tax viz. a. Treatment or process should be undertaken by a person; b. Such treatment or process should be on goods; and c. These goods should belong to another registered person The appellant further deposed that since all of the above three conditions are being fulfilled by them, their activities squarely fit into the job work. Further, the representative of the appellant emphasized on the definitions of Job Work as well as of 'manufacture' under CGST Act, 2017 and deposed; (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.....
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....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 deposed that they would be making further submissions in this case regarding the current power supply arrangement to M/s. JSL and whether M/s. JSL have any captive Coal fired power plant units in any of their manufacturing premises for generation of electricity or otherwise. Also when the Departmental representative argued that coal is not specified as import products for the export of Hot Rolled Non Alloy Steel Plates /Sheets/hoops & Strips under Export Code C508 as per SION specified by DGFT, the appellant's representative deposed that they were very much sure about the existence of coal in the import products list for the export of Hot Rolled Non Alloy Steel Plates /Sheets/hoops & Strips under Export Code C508 as per SION specified by DGFT and have committed before the appellate authority to submit the documents issued by DGFT which would testify their claim regarding coal as one of the import products for the export of the HR Steel manufactured by M/s. JSL. Finally, the appel....
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....e 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 wherein a resolution was passed for seeking approval to make units III and/or IV captive units of Ispat Industries. The said Ispat industries is currently the Dolvl, Maharashtra Plant of JSW Steel Limited (JSL). (ii) A copy of the letter dated 26.04.2011 written to the Maharashtra State Electricity Distribution Co. Ltd. for the purpose of captive power plant. (iii) A copy of the letter dated 20.04.2012 wherein open access permission was provided by the Maharashtra State Electricity Distribution Co. Ltd. for wheeling of power for the captive power plant at Jaigad, Ratnagiri. (2) The appellant I....
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.....T. 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 the process and treatment, and thus not covered under the definition of Job Work. 42. The Appellant, through written submissions and during personal hearing, have drawn our attention towards vario....
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....ce the definition of 'Job Work' under CGST/MGST Act as under: 'Job work means any treatment or process undertaken by a person on goods belonging to another registered person' From the above definition, it is clear that job work involves (i) two persons, (ii) goods and (iii) process treatment on the goods. Also, the procedure for job work is prescribed under Section 143 of CGST Act 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 ....
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....ements of Section 143 are met with regard to bringing back the Inputs after process/treatment on the inputs, as the inputs in this case are consumed in making electricity. 48. Further, we find from the details of the permissions received from Maharashtra State Electricity Distribution Co. Ltd.(MSEDCL) that M/s JSL is to be supplied electricity through the distribution system of MSEDCL, which means that electricity, being the intermediary goods after processing of the inputcoal, is being uploaded by M/s JEL to the MSEDCL power grid and this grid In turn Is being used to obtain the electricity by M/s JSL.. The permissions submitted involve various terms and conditions on the supply of the energy from the Grid of MSEDCL to M/s JSL including fees/charges etc. in addition to the regulations which 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....
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....#39;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 regard to the present context is "a piece of work especially one done for hire or profit". The expression job work' is assigned the following meaning . "work done and paid for the job". The Notification, It is evident, was conceived in the interest of small manufacturers undertaking job-works. The idea behind the Notification was to help the job-workers - persons who contributed mainly their labour and skill, though done with the help of tools, gadgets or machinery, as the case may be. The Notification was not intended to benefit those who contributed their own material to the articles supplied by the customer and manufactured different goods. We must hasten to add that addition or application of minor items by the job-worker would not detract from the nature and character of his work. For example, a tailor entrusted with a cloth piece and asked to stitch a shirt, a pant or a suit piece may add his own thread, buttons and lining cloth. Similarly, a factory may be supplied the shoe u....
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.... 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 adopters and sleeves are supplied by Modipon. it is not suggested that the value of rings, adopters and sleeves is very small vis a vis the value of steel pipes. The additions made by the appellant are not minor additions; they are of a substantial nature and of considerable value. Except the pipes, all other items which go into the manufacture of cops are either purchased or procured by the appellant himself and he manufactures the cops out of them The work done by him cannot be characterised as a job-work If all the requisite rings, adopters and sleeves hud also been supplied by Modlpon, ....
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.... the 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 the decision primarily is on allowance of credit and not on whether the same is job work or not. Also, the captive power plant was with M/s Indorama Synthetics Ltd., separated by just a wall by M/s....
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....er or not was not presented before the Tribunal for adjudication. The issue was of admissibility of credit. Also as in the case of Vikram Cement (cited supra), the primary issue was the interpretation of the terms 'within the factory of production. (vi) In the other cases cited below:- a) Reliance Industries Ltd. vs Commissioner Of C. Ex. on 4 February, 1997 b) Equivalent citations: 1997 (93) 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 pl....