TaxTMI 
TaxTMI 
2020 (6) TMI 704
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..../B-04 dated 05.03.2018 = 2018 (5) TMI 763 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA. The Maharashtra AAAR had, vide its Order No. MAH/AAAR/SS-RJ/01A/2019-20 dated 02.07.2018 = 2018 (7) TMI 511 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, disposed of the aforesaid appeal by holding as under: The processing undertaken by a person on the goods belonging to another registered person qualifies as job work even if it amounts to manufacture provided all the requirements under the CGST/MGST Act in this behalf, are met with. Further, under the facts and circumstances of the instant case, the transaction proposed to be carried out between the Appellant and M/s JSL does not qualify for Job Work envisaged under Section 2(68) read with Section 143 of the CGST Act, 2017. The AAAR in the said ruling dated 02.07.2018 had observed as under: (i) The condition stipulated in the definition of the "Job work" provided under section 2(68) of the CGST Act, 2017, which envisages the presence of the two persons only, viz. the Principal and the job worker, in any job work transaction, is not satisfied due to the inevitable presence of the 3' Party i.e. MSEDCL, which happens t....
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....ods produced out of materials supplied by customer and where the job workers contribute mainly their labor 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 an activity would amount to job work." Since, in the instant case, the other inputs,e.g. air, water etc., procured by the Appellant, i.e. JEL, which are essentially required for the generation of power, cannot be considered as the minor additions because of their volume and cost associated with them, the proposed arrangement/transaction will not have the essence or characteristics of the Job worker, as per the rulings of the aforesaid Supreme Court Judgment, which contemplates that only the minor additions of the inputs can be done by the Job worker on the inputs supplied by the principal in any job ....
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....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 after collectively referred to as 'inputs') and supply the same to the Appellant for the purpose of carrying out the activity of generation of power. On receipt of the same, Appellant would undertake certain processes to convert the said inputs into power. The power generated from the aforesaid process on inputs will be supplied back to JSL for which the Appellant would be receiving job work charges as per the rate that would be agreed as per the Job Work Arrangement. During the whole process under the Job Work Agreement, the title in the inputs vest with JSL along with the power generated with the use of such inputs. In addition to power, fly ash and other resultant products generated at power plant using the inputs will also vest with JSL and the Appellant will have no ownership in such resultant products. The Ap....
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....ama Textiles Ltd (supra) is reproduced below where the issues of generation of electricity under a job work model is not even disputed by the Authorities - "8. The fact of electricity being intermediate goods used in manufacture of final product by Respondent No. 1 is not in dispute before us. It is nowhere contended that M/s. MR cannot be a job worker and generation of electricity cannot be outsourced. When it can be outsourced, it also follows that Respondent No. I need not have a captive power plant. Only contention is fuel oil is not received in factory of production or/and is not being used or processed any time within factory of production. It is apparent that said issue stands concluded by the above-mentioned judgment of Hon'ble Apex Court and there is no change of law in this respect. It is also clear that inputs or raw material can be directly forwarded to job worker for production of intermediate goods. There is no challenge to understanding/agreement between Respondent No. 1 and M/s. IRSL. We do not find anything perverse in findings recorded in paragraph 6 of the order No. A/67/2007/EB-C-II, dated 31-1-2007 in Appeal No. E/3701/05-Mum. These reasons hold good e....
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....anical engineers and to design, construct, fabricate and manufacture all kinds of machines, tools and implements, iron and brass founders, metal workers, machinists, iron and steel workers, smiths, metallurgist, producers of electric energy, appliances: to carry out research and development for any activity (Emphasis supplied) 9. This being the case, it is submitted that it is squarely clear that generation of power is one of the business activities of JSL (i.e. the Principal) and coal used for such business qualifies as input. The Ld. Appellate Authority entirely bypassed this and has distinguished the same claiming that coal would not qualify as an input for the Principal. Even at the time of adopting the said rejection, the Ld. Appellate Authority failed to appreciate that the ambit of the term 'business', covers any trade, commerce, manufacture, profession, vocation, adventure or any similar activity as well as activities which are incidental or ancillary to the said activities. Thus, the activity of generation of power is clearly within the ambit of a business as per the Memorandum and accordingly coal would qualify as an input. 10. Additionally, the Appellant re-iter....
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....n the manufacturing process would qualify as inputs under the CGST Act. Contrary to the same, it has been clarified that as long as the subject inputs are used/ intended to be used for the assessee's business and there are no specific restrictions under the GST legislation, the same would qualify as eligible inputs for the purpose of availment of credit under the said legislation. 15. Without prejudice to the above, the Appellant humbly submits that JSL has been regularly importing coal as an input, for the process of generation of power, which is used in the manufacture of steel. JSL has been availing credit of eligible duties and taxes under pre-GST as well as under GST regime. Eligibility of credit was under examination by the concerned tax authorities on the said imports based on the applicable provisions under Rule 3 of the CENVAT Credit Rules 2004. In the said context, reference is sought to the order issued by Commissioner of Central Excise and Customs - Belgum (010- No. BEL/ EXCUS/000/COM/B.HR/ 005/13-14/CX dated 30.06.2014), which allowed JSL CENVAT Credit of the Counter veiling Duty paid on the import of steam coal. The relevant portion of paragraph 25 is quoted as fol....
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....it sells electricity outside the factory to the joint ventures, vendors or gives it to the grid for distribution? In the case of Collector of Central Excise v. Rajasthan State Chemical Works reported in 1991 (55) E.L. T. 444 (S.C.) = 1991 (9) TMI 73 - SUPREME COURT the test laid down by this Court is whether the process and the use are integrally connected. As stated above, electricity generation is more of a process having its own economics. Applying the said test, we hold that when the electricity generation is a captive arrangement and the requirement is for carrying out the manufacturing activity, the electricity generation also forms part of the manufacturing activity and the "input" used in that electricity generation is an "input used in the manufacture" of final product..... (Emphasis Supplied) 18. Basis the above rulings, the Appellant humbly re-iterates that coal has been construed as an eligible input used for the manufacture of power which in turn is used for manufacturing/supply of taxable product and accordingly credit for the same has been allowed. These facts are akin to the Appellant's matter, who generates power from a captive power plant of the Principal (i....
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....ts and input 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-TIOL-(982-CESTAT-MAD)] = 2015 (10) TMI 1929 - CESTAT CHENNAI and in the matter of The India Cements Ltd and Others vs CCE, Salem and Others = 2015 (6) TMI 580 - CESTAT CHENNAI" also followed the above principle. Relevant extract of the India Cement Ltd case is reproduced as follows: Our view above is fortified from the judgment of the Hon'ble High Court of Bombay in Central excise appeal No. 14/2012 in the case of CCE, Aurangabad Vs. Endurance Technology Pvt. Ltd., disposed on 02.12.2014 = 2015 (6) TMI 82 - BOMBAY HIGH COURT. The Hon'ble Court examining the meaning of the '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 wind mills to generate energy which is made available through power board under barter system. 21. In the judgment of Endurance ....
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....p; Water 7.51 0.39% Compressed Air 1.29 0.07% Ash Handling System 13.66 0.70% Circulating Water Intake 16.91 0.87% Sea Water Intake 8.20 0.42% Power generation cost 1943 100% 24. Basis the above, the Appellant submits that coal and other inputs constitutes a major cost i.e. more than 95% of the total cost of materials that are required for generation of power. These are supplied by the Principal (i.e. JSL). The cost towards water and air does not exceed 0.5% of the cost of inputs, which is made available by the Job Worker (i.e. the Appellant). These charges, along with other expenses that are required for generation of power from coal are in any case included under the ambit of Job Work charges, chargeable by the Appellant. 25. Seeing a reference to the above, the Appellant refers to the Appellate Authority's order, where, at paragraph 50, the decision of Prestige Engineering (India) Limited vs Collector of C. Excise, Meerut [1994 (73) E.LT. 497 (S.C)] = 1994 (9) TMI 66 - SUPREME COURT, has been referred. Further, the Ld. Appellate Authority has cited reference of a principle enumerated therein, which is reproduc....
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....ant paragraph of the said judgement is reproduced as follows: 28. The above process clearly demonstrates that coal is the primary raw-material for generation/production of electricity in thermal power plant and without coal, no electricity can be produced/ generated/ manufactured. 29. Basis the above, the Appellant humbly submits that the conclusion drawn by the Appellate on the grounds that air and water constitute a major input which is provided by the Job Worker is grossly erroneous and is liable to be set aside. SUBMISSION OF OTHER DOCUMENTARY EVIDENCES/ DETAILS 30. The Appellant humbly submits that it was alleged by the Appellate Authority that certain documentary evidences/ details were not submitted to justify the Job Work activity. To the same, following are the Appellant's responses: 31. Agreement or Proposed Agreement to understand the quantity and value of inputs being supplied by the Principal and the amount and quantity of inputs/ materials being used by the job worker. To the above, the Appellant submits that the transaction is at a conceptualization stage and there is no proposed agreement. However, illustrative clauses of the proposed agreement betwee....
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....N norms cannot be applied in the facts of the present case. (Emphasis Supplied) 37. Basis the above, it is evident that SION are for guidance purposes and a sole reliance on SION cannot be placed to conclusively decide on the type of inputs. Additionally, there are a plethora of judgements wherein credit of inputs has been allowed, even though the same are not mentioned under the SION norms of the applicable products. These judgments are mentioned herein under: Commissioner of Central Excise, Indore vs Grasim Industries Limited [2002 (147) E.L.T. 190 (Tri.-Del)) = 2002 (2) TMI 998 - CEGAT, NEW DELHI; Jaypee Rawa Cement vs Commissioner of Central Excise, MP [2001 (133) E.L.T. 3 (S.C.)) = 2001 (8) TMI 1332 - SUPREME COURT; Essar Steel Limited vs Commissioner of Central Excise, Surat-I [2001 (129) E.L.T. 213 (Tri.-Mum.)] = 2000 (12) TMI 382 - CEGAT, MUMBAI; Vikram Cement vs Commissioner of Central Excise, Indore [2006 (194) E.L.T. 3 (S.C.)] = 2006 (1) TMI 130 - SUPREME COURT. 38. In view of the various submissions made by the Appellant and the additional submissions made herein, it is submitted that- 39. (i) Coal constitutes an input for the Principal (i.e. JSL) in the pro....
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....l which is used as fuel in their coal fired power plant, whereas M/s. JSL are the manufacturer of steel. From the records it is observed that M/s JSW International Tradecorp Pte. Ltd situated at 9 Raffles Place, #14- 01 Republic Plaza, Singapore 048619 sources different types of Coal; (a) Coking coal falling under Customs Tariff Heading 27011910 for Amba River Coke Ltd., Dolvi Village, P.O. Wadhkal. Tai-Pen, Dist. - Raigad, Maharashtra 402107, (b) Coking coal falling under Customs Tariff Heading 27011910 for their unit M/s. Amba River Coke located at Geetapuram, Dolvi Pen, Raigad 402107. (c) Coking coal falling under Customs Tariff Heading 27011910 for JSW Steel Ltd., Geetapuram Dolvi to Pen Dist.-Raigad, Maharashtra, (d) PCI Coal falling under Customs Tariff Heading 27011910 for manufacture of Steel JSW Steel Limited located at Geetapuram, Dolvi Pen, Raigad 402107, (e) Steam Coal falling under Customs Tariff Heading 27011920 for production of electricity by JSW Energy Limited Kunbiwadi, Nandiwade, Post Jaigad, Ratnagiri 415614, 43. From the above it can be observed that specifications for coal are set out by JSL for Coking Coal, PC, ....
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....oal would stand consumed in the process and would be irretrievable in the same form after the conclusion of job work, the condition under Section 143 of the CGST Act of bringing back the same inputs by the Principal would not stand fulfilled. 45. Steam Coal is not input for M/s. JSL, but it is input for M/s. JEL which generates the electricity using the said Steam coal as fuel for running the turbine, which in turn generates the electricity. 'Steam Coal' is not the input for M/s. JSL therefore; the goods sent to the job worker should be the Inputs of the Principal. Here, M/s. JSL are acting as the Principal, so the Inputs should belong to them. However, in the present case, the goods being proposed to be sent to M/s JEL, i.e. coal, are the Inputs for M/s JEL itself for their final product i.e. Electricity and not the Inputs for the Principal, i.e. M/s JSL as they are manufacturer of Steel and not power. Hence Steam Coal does not constitute as an input for the Principal (i.e. JSL) in the process of generation of power. 46. SECTION 2(68) defines job work as; "job work" means any treatment or process undertaken by a person on goods belonging to another registered per....
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....st. From the affidavit in support of petition filed before MERC by Maharashtra State Electricity Distribution Company Limited (MSEDCL), it can be seen that M/s JEL had entered into a Power Purchase Agreement (PPA) with MSEDCL. 49. Para 3.4.1 of the petition clarifies that the seller (M/s JEL) would supply power to the extent of contracted capacity to MSEDCL, where the seller (M/s JEL) shall not itself use any of the electricity generated by the unit, to the extent of its contracted capacity. M/s JSL is engaged in manufacture of steel and M/s JEL is engaged in production of electricity which it appears would not solely be for its own consumption, the electricity generated at M/s JEL is said to be transmitted through electrical grid of MSEDCL to the consuming Steel manufacturing unit of M/s JSL, however as there is no agreement between M/s JEL and MSEDCL available how would M/s JSL ensure that electricity transmitted would be sent to them and not be utilized somewhere else by MSEDCL. 50. As per the provision of Section 143(1)(a) of the CGST Act, 2017, there should be involvement of only two persons i.e. one principal and another job worker for any transaction to be falling unde....
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....uying power from either MahaGenco, Captive Power Plants or from other State Electricity Boards and Private sector power generation companies. Railways ferries passengers, parcel and freight services of various commodities and fuels in industrial, consumer and agricultural segments across the length and breadth of India. It is not into the business of buying commodities and fuels in Industrial, consumer and agricultural segments so the similarity ends at distribution, therefore the comparison between the rail authorities charging fee for transportation of inputs, were similar to the amount paid to the Grid is weak. The Transporter or Railways cannot dictate terms, divert or send the consignment/ to somebody else which MSEDCL can. In the instant case, the manufacturer/principal cannot bring back their inputs, which is in the form of electricity, without getting due and prior approval from the competent authority. Hence Inputs proposed to be sent to a Job Worker cannot be brought back and the transaction undertaken would not fulfil all the conditions mentioned under Section 143 of the CGST Act to qualify as a Job Work transaction. 52. JEL have relied on the decision of the Hon'ble ....
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....ated at Sr. (i) above, the Appellant, vide their additional submissions dated 10.07.2019, have inter alia contended that the steam coal, proposed to be supplied to the Appellant i.e. JEL, constitutes one of the inputs for JSL, which manufactures the steel products, as the coal proposed to be sent by JSL to the Appellant will be supplied back in the form of electricity, which in turn are used by JSL to manufacture their final products i.e. steel. They, inter alia, have place their reliance on the definition of 'inputs' as defined under Section 2 (59) of the CGST Act, which, they averred, is wide enough to cover the steam coal, proposed to be sent by JSL to JEL for conversion into electricity on the job work basis. The said definition of input is reproduced as follows: 'input' means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; (Emphasis supplied) For the said purpose, reliance was also placed on the term 'business' which is defined under Section 2(17) of the CGST Act. For the said purpose: Business includes - (a) Any trade, commerce, manufacture, profession, vocation, adve....
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....nufacture of goods (say aluminum) which are exported under Bond/Letter of Undertaking without payment of duty. Refund claim is filed for accumulated Input Tax Credit of compensation cess paid on coal. Can the said refund claim be rejected on the ground that coal is used for the generation of electricity which is an intermediate product and not the final product which is exported and since electricity is exempt from GST, the ITC of the tax paid on coal for generation of electricity is not available? 59. Clarification: There is no distinction between intermediate goods or services and final goods or services under GST. Inputs have been clearly defined to include any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Since coal is an input used in the production of aluminum, albeit indirectly through the captive generation of electricity, which is directly connected with the business of the registered person, input tax credit in relation to the same cannot be denied. (Emphasis Supplied) 60. The Appellant, relying on the abovementioned circular issued by the CBIC, has drawn an analogy to the effect that that the t....
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....ntion, they had cited following court judgments where job work has been accepted even when the identity of the inputs has 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.)] = 1994 (9) TMI 66 - SUPREME COURT (b) Appellate Collector of C.Ex. V/s. Wadpack Pvt. Ltd. [1997 (89) E.L.T. 24 (S.C.)] = 1996 (11) TMI 76 - SUPREME COURT (c) Emcee Crown Corks (P) Ltd. V/s. Commissioner of C.Ex. Bangalore [2002 (149) E.L.T. 639 (Tri.- Bang.) = 2002 (3) TMI 168 - CEGAT, BANGALORE (d) Bharat Commerce and Industries Ltd. V/s. Collector [1997 (94) E.L.T. A136] = 1997 (2) TMI 580 - SC ORDER 65. They have further contended that electricity can be generated on a job work basis. They had also cited the following judicial pronouncement in order to support this contention: Commissioner of Central Excise, Nagpur vs Indorama Textiles Ltd 2010 (260) ELT 382 (Born HC) = 2009 (10) TMI 571 - BOMBAY HIGH COURT Haldia Petrochemicals Ltd vs CCE, Haldia 2006 (197) ELT 97 (Tri.- Delhi) = 2005 (1) TMI 306 - CESTAT, NEW DELHI Sa....
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.... considerable amount of other inputs in terms of volume and cost in the form of water and air besides the steam coal to be supplied by JSL, the activities carried out by the Appellant in the proposed arrangement would not be qualified for job work in accordance with the Hon'ble Supreme Court Judgment in the case of Prestige Engineering (India) Ltd. Ws. Collector of C.Ex. Meerut, [1994 (73) E.L.T. 497 {S.C.)] = 1994 (9) TMI 66 - SUPREME COURT, wherein it was observed by the Apex Court that for any activity or transaction to be construed as the job work, the job worker is allowed to add only minor inputs or raw materials to the inputs supplied the principal. However, in the subject arrangement, the proposed job worker i.e. JEL/Appellant would be adding considerable and sizeable amount of inputs in terms of volume and cost in the form of air and water to the input supplied by the proposed principal i.e. JSL in this case, and the activities carried out by the Appellant would not qualify for the Job work in terms of the above observation of the Apex Court. In this regard, the Appellant has furnished the certificate of the Cost Accountant pertaining to F.Y. 2017-18, wherein it has bee....
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.... in the impugned in impugned AAAR order dated 02.07.2018 = 2018 (7) TMI 511 - APPELLATE AUTHORITY FOR ADVANCE RULING, MAHARASHTRA, the Appellant has contended that there is no bar on the involvement of the third person in the transportation of the inputs from the principal to the job worker, and from the job worker to the principal. They elaborated this with one illustration, wherein some tangible goods are sought to transported between the premises of the principal and that of job worker by availing the facility of railway. In this case, the railways will be acting in the capacity of the regulatory authority for the purpose of the transportation of the said goods, as they will be allocating the rakes and carriages for the subject goods, similar to the power regulator in the case of the transmission of electricity from one place to another. They further contended that transportation of the goods between the principal and the job worker by the railways/roadways has never been disputed in the context of the fulfillment of the condition prescribed for the job work transaction/activity. They also cited the decision of the Hon'ble High Court of Bombay in the matter of CCE, Aurangabad....