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2018 (7) TMI 511
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....ce Ruling No. GST-ARA-05/2017/B-04 dated 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 ....
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....'. 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 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....
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....ucidly explained the meaning of the term 'treatment and processing'. ........ ........ 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', '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 ....
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.... the CGST Act has widened the scope of activities as compared to the definition provided under the Notification No. 214/86 - CE dated 23.03.1986 (as amended from time to time) ['Notification'] which was later incorporated in CENVAT 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 t....
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....ent of the Hon'ble Supreme Court and Hon'ble High Court in Ujagar Prints Etc. vs. Union of India and Others (1988 (38) E.LT. 535 (S.C.)), Harrison Synthetic Bristles vs Collector of Central Excise, Bombay (1997 (95) E.LT. 9 (S.C.)) and Sunbel Alloys 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 impug....
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.... should be understood and the valuation of the said goods to be done. We reproduce Paragraphs 15 and 16. "15. A job worker may undertake manufacturing of excisable goods on account of others from the raw material supplied to him free of cost, and on return of the 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 ....
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....ter 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 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&#....
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....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 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....
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....(No. 35 of 1952) applies and includes the premises or machinery situated in or adjacent to mine and used for crushing, processing, treating or transporting the mineral" 30. The Court held that the word 'processing' used in the Explanation is not clear and hence the rule of 'noscitur a sociis' needs to be applied which means that the meaning of the word is to be judged by the company it keeps. 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 ....
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....)...(e) (ea) manufacture of leather goods or foot wear falling under Chapter 42 or 64 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975) respectively; (f) all food and food products falling under Chapters 1 to 22 In the First Schedule to the Customs Tariff Act, 1975 (51of 1975); (g)....; (h) manufacture of clay bricks falling under tariff Item 69010010 In the First Schedule to the Customs Tariff Act, 1975 (51of 1975); (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 "M....
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....ereby 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 representative, however, differed with the ruling passed by AAR and argued that as per the provision of Section 2(68) of the CGST Act, 2017 "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. 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 r....
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.... 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 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 f....
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.... the form of coal and supplying 'intangible' goods in the form of electricity. Thus, the inputs which are being sent to the appellant by JSL are being received in completely different form and character, i.e. the essence of 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 Boar....
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....ts for over two decades. (9) In para 6.5, they inter-alia submitted that resultant intermediate goods may be different from the inputs sent by the Principal. For this, they cited following court judgment where job work has been accepted even when the identity of the inputs have been lost, when the intermediary goods are received back from the job worker. (a) Prestige Engineering (India) Ltd. V/s. Collector of C.Ex. Meerut, [1994 (73) E.L.T. 497 (S.C.)] (b) Appellate Collector of C.Ex. V/s. Wadpack Pvt. Ltd. [1997 (89) E.L.T. 24 (S.C.)] (c) Emcee Crown Corks (P) Ltd. V/s. Commissioner of C.Ex. Bangalore [2002(149) E.L.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 ....
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.... steel products and M/s JEL are engaged in production of electricity, using coal as main input we have gone through the citations and note that in none of these the central issue of decision was on the subject of JOB WORK- All these judgments pertain to the admissibility of the Cenvat/Modvat credit on the goods utilized for manufacture of intermediate goods, which is not the case here. The Applicant had not gone before the AAR on issue of admissibility of credit of tax paid on the inputs. The impugned application pertains to the consideration of activity as Job work, and we would be restrict ourselves to the issue involved. 45. In order to elaborate further, we reproduce 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 ....
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....eing 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 coal is also an input for M/s JSL as the same is utilized in the manufacture of Electricity which is finally used In the manufacture of final products of M/s JSL, the question arises how the requirements 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....
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....te 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 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-wor....
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....the Inputs received from M/s JSL by M/s JEL and co-relation thereof with the goods supplied after job work. Though it is not possible to ascertain the quantity and value of the material being utilized by the job worker in the conversion of coal provided by the principal into electricity accurately in absence of facts before us, it can 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 fit....
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....ny decision about any activity to be job work or not, except in the matter of M/s Prestige Engineering(lndia) Ltd. (iii) The facts and circumstances of the cases cited by the appellant were different from the facts of the instant case. 55. We would also like to distinguish the said judgments as under: (i) Essar Steel Ltd. v/s Commissioner of C. Ex. Surat-I, 2001(129) ELT 213(Tri. Mum.): The issue in the above case was an interpretation of the term 'within the factory of production'. There is no such clause for interpretation in the present case and therefore the case has no relevance here. Also, entire electricity generated by M/s EPL, a subsidiary of M/s Essar Steel Ltd and adjacent to steel mill, was transmitted through 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 ....
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....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 manufacture of petrochemical products is Naphtha which is procured from India Oil Corporation or other indigenous oil refineries or by direct import from overseas on payment of duty. A small portion of the Naphtha, either as such, or after being partially processed, is also sent to a power plant for generation of electricity or steam". In the instant case, the goods proposed to be sent for job work(Steam Coal) are not the raw material of the Principal. (v) SANGHI INDUSTRIES 2006 (206) ELT 575 ( Tri Del) / SANGHI INDUSTRIES ( 2014 302 ELT 564) The issue whether the power plant was a job worker 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 Commissione....