TaxTMI 
TaxTMI 
2020 (10) TMI 468
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....and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT 2.1 The submissions made by the Ms. Kolhapur Foundry & Engineering Cluster, the applicant is as under:- 2.2 Applicant, is involved in promotion of commercial activities relating to Foundry Industry & preservation of environment through its Sand Reclamation Plants. 2.3 Used/ waste sand of Foundry Industry is neither capable of being reused nor being capable of being dumped anywhere in open, due to environmental reasons like, contamination of fertile oil/ water pollution. Applicant processes such waste sand vide heat treatment & various other set of small procedures and sand is thus reclaimed and made re-usable. 2.4 Following are the main steps in producing the reclaimed sand: (i) Waste Sand is received at applicant's KFEC plants from various Found....
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.... i.e. Sand is then handed over to the recipient on completion of the production. 2.6.4 In order to appreciate whether the activity undertaken by the applicant is job work GST Flyers have been referred to, as under:- It is mentioned that Job work sector constitutes a significant industry in Indian economy. It includes outsourced activities that may or may not culminate into manufacture. The term Job-work itself explains the meaning. It is processing of goods supplied by the principal. The concept of job work already exists in Central Excise, wherein a principal manufacturer can send inputs or semi-finished goods to a job worker for further processing. Many facilities, procedural concessions have been given to the job workers as well as the principal supplier who sends goods for job work. The whole idea is to make principal responsible for meeting compliances on behalf of the job worker on the goods processed by him (job worker), considering the fact that typically the job- workers are small persons who are unable to comply with the discrete provisions of the law. The GST Act makes special provisions with regard to removal of goods for job-work and receiving back the good....
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....by them. To qualify the activity as job work, out of the quantities dumped by the foundries of waste sand after normal losses of about 20%, remaining 80% quantities should be picked up by the foundry units. But the arrangement in the case of applicant is operating more or less on convenience basis, meaning, as the waste sand is to be dumped in the specified areas only not anywhere else, the foundries may dump whatever sand is available with them at any given point in time with applicant, whereas only those quantities which are required by them at any given point in time only will be picked up which may be more or less than actually dumped waste sand after deducting normal loss. So it gives this transaction the color of supply of goods. Hence, the said transaction based on its nature, characteristics and unique attribute does not satisfy the criteria to qualify it as Job Work and should be construed as Supply of Goods. If this is to be treated as Supply of Goods in that case we also seek the clarity regarding one of aspect pertaining to the valuation of the same. 2.10 Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion approved a p....
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.... Rule 30 or Rule 31 in that order. 2.12.4 As per Rule 30 of CGST Rules, Where the value of a supply of goods or services or both is not determinable by any of the preceding rules of this Chapter, the value shall be one hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services. Even this rule does not become applicable since waste said is not usually produced/ manufactured but it is just a by-product of Foundry operations, hence there is no Cost of Production attached directly to his waste used sand. 2.12.5 Also taking into consideration point no point no 1, 2 & 3 above, as per Rule 28 of CGST Rules, The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall (a) be the open market value of such supply; (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality, (c) if the value is not determinable under clause (a....
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....this project two sand reclamation plants are established, at Shiroli MIDC and at Gokul Shirgaon MIDC, Kolhapur. 2.13.4 Waste disposable sand: Waste disposable sand are of mainly two types; Black sand (disposable green sand) and core sand. Disposable black sand is non reusable sand generated in foundry molding process. Core is a solid block of sand used in molding process. Such core becomes obsolete once it is used in moulding process. This core sand also is to be used for reclamation. This disposable black sand and core sand generation process is continuous in foundry process and it is necessary to dispose this generated sand. This disposable sand do not have any commercial value. 2.13.5 Environment impact: Send, a natural resource for foundry unit for casting production, is becoming scarce. Consideration the present and future use of sand by foundries there may be chances of facing problems regarding availability of fresh sand as well as disposition of used waste sand, Waste sand cannot be dumped anywhere in open as it may lead to water pollution and contamination of farming land. Sand reclamation is the answer for such problems. Further, waste generated during reclama....
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....eparator This unit is used to separate out iron metal particles from waste sand. 4. Bucket Elevator No 1 Bucket elevator is a machine which is only used to transfer sard from lower height to upper height. It transfer waste mixed sand from conveyor no 1 to dryer. 5. Dryer As name suggests the dryer does drying of mixed waste material. Removing moisture from waste material will help to reduce fuel consumption. For drying purpose hot air blower (ID fan) extract fumes and hot air from furnace top to dryer. This is very energy efficient process in which excess energy in the form of hot air and fumes reused. 6. Bucket Elevator No 2 It is used to transfer material from dryer to crusher. 7. Crusher The crusher ensures that the sand obtained is of homogeneous size and smooth surface. The binder on the sand surface is also removed by crushing. mesh of crusher separates metal waste, paper waste, plastic waste and wooden waste. 8. Reject belt conveyor It's a part of crusher which removes foreign waste and unwanted material from processed crushed sand. In specified frequency reject belt conveyor g....
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....rward and reverse vibration. Output of furnace i.e. thermalIy reclaimed sand gets sieved on vibrating conveyor. Clay gets separated from sand. Also spraying water helps to reduce temperature of sand. 17. Chain bucket elevator It is used to transfer thermally reclaimed sand from vibrating conveyor to Fluid bed cooler. 18. Fluid bed cooler Fluid bed cooler is used for cooling and dust cleaning. Fluid bed cooler is composed of base, perforated plate, blower system and cooling system, etc. The hot sand fall into the perforated plate from chain bucket elevator. The blower system blows in cool air to take down temperature of heated sand. Then the cooling system strays water to perform heat-exchange cooling. The air fully contacts with hot sands to take away the moisture of the hot sands. Newly-processed sands collide and rub with each other to bring forward reproducing function. During the movement, the rubbing effects between sand particles peel off the stuck micro coating and discharge them through the dust collector system. Thus, the hot sand gets cooled and de-dusted. The sand move towards the outlet by the fluidized bed and air strike, and the coo....
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....cally a circle around the fixed point driven by the eccentric sleeve. The movement direction of the frame is vertical to the central line of the eccentric shaft. Due to the cyclical rotation of the frame, the material on the screening surface move towards the discharge end at a fixed speed. Material of different sizes goes through the screen mesh so as to be sieved and separated. Selection of sieves depends upon needs and requirements of finished reclaimed sand. There are total 2 no's of sieve shaker machines. 28. Bucket elevator No 8 & 9 It is used to transfer reclaimed sand from sieve shaker 1 and to reclaimed sand hopper 1 & 2 respectively. 29. Reclaimed sand hopper Finished reclaimed sand product stored in the 2 hoppers of 100 MT each for different grades of sand. Reclaimed sand is ready to transfer from hopper to transportation vehicle. 30. Dust collectors There are 2 no's of dust collector which are back filter type used for dust collection process. 2.15. Additional Submission By Applicant made on 26.12.2019; 1. On the date of personal hearing 12.12.2019, we have received a written submission from state authori....
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....licant, bearing no. 19-20/SH/DEC/37 dated 7-Dec-2019 shows the rate of sand is at Rs. 2.50 per kg. The market rate of fresh sand is at Rs. 3.00 per kg. When compared these two prices, it appears that both prices are nearly one and the same. Therefore, there is reason to believe, that, this is not merely job work, but supply of goods. 3.2 As regards the second question, value of inward supply does not have direct bearing on the outward value, in this case, as the applicant has admitted, the inward supply of the waste sand is at Rs. Nil. As such, there is no impact of inward value on the outward supply. 3.3 Socio-Ecological parameters in the said case is already taken into account by the system, as 83 % of setting cost is born by Central and State governments together and hence, may not cause any impact on taxation. 3.4 Facts involved in this case lead to the conclusion that, it is not 'Job Work Service' but 'Outward Supply of Goods' and hence may be taxed @ 18% under the HSN Code No 3824. 3.5 Further submissions are made by the jurisdictional officer as under: 3.5.1 The material value of the inward of waste foundry sand is nil. 3.5.2 The assesse has claimed set-off....
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....s or Job work, for which we will examine the definition of "Goods", "Manufacture" and Job work" under the provisions of CGST ACT. 5.3.1 Section 2(52) of the GST Act defines 'goods' as: (52) 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. 5.3.2 Section 2(72) of the GST Act defines 'manufacture' as: (72) "Manufacture" means processing of raw material or inputs in any manner that results in emergence of a new product having a distinct name, character and use and the term "manufacturer" shall be construed accordingly 5.3.3 Section 2(68) of the GST Act defines 'jobwork' as: Section 2 (68): "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. 5.3.4 From a combined reading of the definition of "job work" and the procedure of job work as prescribed u/s 143 of the CGST Act and Rule 45 of Rules, it is the principal who will send ....
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....hed product satisfied the definition of the term 'Goods' mentioned u/s 2 (52) of CGST Act. We do not hesitate io treat as this new product as "Goods". 5.3.10 We further find from the documents and submissions made before us that the input received is waste material which is dumped at applicant's location due to environmental concerns. The foundries/Suppliers have supplied unusable and non-valuable material in the form of waste sand. The intention of the foundries/Suppliers is not to treat the waste sand as semi or finished goods for the purposes of further process. Actually waste sand is a raw material for the applicant and after the processing, usable sand is produced which is then sold to foundries as and when orders are received. The sand is not sold to the foundries in a fixed ratio to the waste sand received. No processing charges are collected by the applicant. In fact, the applicant, as reported by the jurisdictional officer, cells the final product to the foundries at Rs. 2.5 per kg. Whereas freshly mined sand is available at Rs. 3.00 per kg and the difference being very minor shows that the applicant is not a job worker in the subject case. It is clearly seen that the f....
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.... explained by the court is that where the principal sends minor input to the job worker and all other inputs and goods utilized in the final products belongs to the job worker then the said process cannot be considered as a job work. In the case at hand applicant has accepted as a matter of fact that, the value is only of the material used/ skill and labour applied by them and the value of input supplied by the customer is nil. Therefore in our opinion, the subject transaction undertaken is a supply of goods, i.e. sale of ready to use sand for the foundry industry and not supply of job work services. 5.4 The second question raised by the applicant is "The used waste sand which is of the value 'Nil' (Refer separate Valuation Certificate by Engineer) will have any impact on valuation?." 5.4.1 The jurisdictional officer has submitted that, as regards the second question, value of inward supply does not have direct bearing on the outward value in this case, since the applicant has admitted that the inward supply of the waste sand is at Rs. Nil. As such, there is no impact of inward value on the outward supply. The jurisdictional officer has also submitted that Socio-Ecological pa....