TaxTMI 
TaxTMI 
2020 (12) TMI 1299
X X X X Extracts X X X X
X X X X Extracts X X X X
..../s IOCL has issued a tender document vide Tender No. RCC/NR/UPSO-II/ENG/PT-84/2018-19 concerning Rate Contract for Fabrication and Transportation of 20 KL &70 KL Horizontal Tanks including transportation of Steel Plates from its Depot to Applicant's works, for Dehradun, Bareilly, Moradabad, Agra & Noida Divisional offices of IOCL. (ii) Delhi & Haryana State office of IOCL has issued a tender documents vide Tender No. RCC/NR/DSO/ENG/PT-109/2018-19 concerning Rate Contract for Fabrication and Transportation of 20 KL & 70 KL Horizontal Tanks for Delhi, Gurgaon, Hissar & Panipat Divisional offices of IOCL. (b). IOCL for this specified purpose of fabrication has also supplied Steel Plates from its depots Free of Cost (FoC) and has obtained Bank Guarantee from the Applicant to cover the cost of these Steel Plates. The detailed list of components which are required by the applicant under the Contract for effecting the principal supply of fabricating 20 KL & 70 KL tanks in following Table. The items have been bought/ manufactured by the Applicant company and used as per the terms of the contract, in fabrication of tanks as per the specification mentioned in the Tender Doc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ith 24 Nos. 14 dia Holes and 3mm Fire Fly Gasket 1 No. 9. 6 mm thick m.s. pad plate for dip rod to be welded inside shell plate 1 No. 10. 12 sq.mm aluminium dip rod 3791 long graduated on one side in cm &1/5 cm. 1 No. 11. 40 Internal dia x 390 Long Lifting Eye made out of 25 dia MS Rod (as per Details) 2 No. 12 Holding Down Bracket Welded to Tank Shell (as per Details) 12 No. 13 225mm Long Turn Buckle (as per Details) 12 No. 14 25 dia x 970 Long Bolt with Hexagonal Head and RH Thread 12 No. 15 25 dia x 200 Long Bolt with Hexagonal Head and LH Thread 12 No. 16 75 x 75 x 8 Thk Angle 200 Long in Holding Down Arrangement 12 No. 17 Earthing Boss Connection as Per Drawing Details. 1 SET (c) The process of fabrication involves usage of various consumables e.g. Welding Electrodes, Gas etc. as well as all the items mentioned above along with Free of Cost Steel Plates. All these components/materials together with the labour charges constitute the value of this work undertaken by the applicant. (d) Only the Steel Plates are being provided by IOCL on Free of cast to the appli....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... premises to applicant premises and delivery & unloading of finished fabricated Tanks from applicant premises to designated site of IOCL is charged and billed separately by applicant to IOCL (but in case of Gurgaon and Delhi Divisional offices, the loading and transportation of Steel Plates is included in the fabrication charges and is not separately billed) thereby also charging similar rate of tax under the same HSN code i.e. the HSN code of the main supply. (l) At present, the applicant company is charging 18% rate of GST under the HSN code 7309 from IOCL on the above stated supply without including or providing any treatment for FoC Steel Plates. (m) Further, as per directions to the applicant by IOCL vide email dated 31/08/2020, IOCL has referred to CBIC Circular No. 126/45/2019-GST dated 22/11/2019 post amendment/reduction in rate of tax for job work services under the SAC code 9988 from 18% to 12% and directed vide email dated 31.08.2020 that the applicant shall charge 12% instead of 18% on the above referred supply. 3. The applicant has sought advance ruling on following questions- I. What should be the Correct Classification with respect to the nature of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fying any supply under the scope of Job Work i.e. i. Treatment or Process ii. By any Person on Goods iii. Belonging to another Registered Person. (g) the term "Treatment" or "Process" have not been defined anywhere under the GST Law. As per Lexico Dictionary powered by Oxford 'process' means "A series of actions or steps taken in order to achieve a particular end "As per Wikipedia 'process' means "A process is series or set of activities that interact to produce a result; it may occur once-only or be recurrent or periodic." (h) On the basis of above definition and based on general trade parlance, 'process' means a continuous mode, method, or operation by which some activity is carried over raw or semi-finished commodity to create an altogether new commercial commodity. Sometimes it results as input for another final product. In other words, process is development, change, or preparation for the purpose of sale. (i) the term 'Treatment' in trade parlance refers to correct something, apply some method, or way to make the product in commercial existence. (j) According to the second limb, the treatment or process shall have....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e the definition of 'job work' does not include the term 'manufacture' but 'process' and 'treatment', the term 'manufacture' as used under SI No. 26(iv) of the Services Rate Notification has been specifically defined under the GST law. Hence, the entry under Si. No. 26(id) dealing with 'job work' is to be read in exclusion of the 'job work' dealing with 'manufacture'. Such exclusion from the entry concerning 'manufacturing' is also apparent from the use of words 'other than (id)' which specifically refer to' job work'. (q) Further, the above dilemma of classification of a 'service' under (iv) or (id) of Si. No. 26 has been tried to be clarified by CBIC through Circular No. 126/45/2019-GST dated 22/11/2019 in para 4 - "In view of the above, it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28-06-2017. Entry at item (id) covers only job work services as defined in section 2 (68) of CGST Act, 2017, that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. On the other hand, the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upply of goods' or a 'supply of service' are absolutely mutually exclusive concepts in themself with no overlapping under the GST law except as provided in Section 8 i.e. 'Composite Supply' or 'Mixed Supply' as well as 'Principal Supply' u/s 2(74). The aforementioned concepts may hence form a basis for determination of whether the impugned supply shall form a supply of 'good' or of 'service'. (v) In the impugned transactions undertaken by the applicant, is engaged in the process of converting FoC steel plates to Tanks as per the specification given in the work order and tender documents of IOCL. However, in preparation of the Tanks, applicant uses various other/additional abovementioned inputs/ material which brings the tanks into existence i.e. without the use of additional inputs/material, complete final product in the form of tanks. (w) It is pertinent to point out that throughout the tender documents, invoice and other documents emphasis has been placed on the word "Fabrication" as well as the actual activity in bringing the Tanks in its desired commercial form can more closely or specifically be covered under 'Fabrication'. According to The Free Dictionary, '....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 characterized as a job-work. If all the requisite rings, adopters and sleeves had also been supplied by Modipon, it could probably have been said that the appellant's work is in the nature of job-work. But that is not the case here." (ab) The above precedent has been followed in number of cases. These inter alia include the decisions of the Mumbai Bench in Navbharat Packaging Indus. Ltd. v. CCE (17.04.1996 - CESTAT - Mumbai): MANU/CM/0219/1996, Bholanath Inte....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he goods received from the principal, can use his own goods for providing the services of job work ..." (af) In light of the above clarification where it has been stated that the job worker can use his own goods in addition to the goods received from the principal, this activity is squarely covered under the ambit of 'Job Work' in accordance to the provisions of GST Law. (ag) The said Circular dated 22/11/2019 only states that there is demarcation between item (id) & (iv) of the referred heading of 9988, wherein there is difference between 'Job Work' done on goods of registered person and unregistered person. (ah) The activity of converting the FoC steel plates also using the applicant's own material would result in 'manufacturing' of a new and commercial identifiable product as 'tank' need to be analyzed within the provisions of the GST law. If a reference to the Goods Rate Notification as mentioned above is made, then the same indicates that a rate of 18% shall be applicable on the supply of 'tanks'. (ai) It is submitted for the kind consideration of the Advance Ruling Authority, that under the erstwhile regime of Central Excise Act 1944, the D....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) If the questioned 'supply' qualifies as manufactured 'goods' then HSN code of the final product needs to be analyzed, the following entry specifying the rate of GST applicable on the 'supply of tank' shall be noted. S.No. HSN Code Description Rate of Tax 223 7309 Reservoirs, tanks, vats and similar containers for any material (other than compressed or liquefied gas), of iron or steel, of a capacity exceeding 300 l, whether or not lined or heat-insulated, but not fitted with mechanical or thermal equipment 18% 6. The application for advance ruling was forwarded to the Jurisdictional GST Officer to offer their comments/views/verification report on the matter. The Assistant Commissioner, CGST & Central Excise Division III, Ghaziabad vide his C.No.V(30)Tech/CGST Div III/GZB/D-I/GBN/131/19/Pt.I/935 dated 29.10.2020 submitted that as only steel plates are being provided by IOCL on FoC to the applicants and all other structural items/material and fitting required for the tank will be arranged by the applicant. The various consumable e.g. welding electrodes, Gas etc are also part of process of fabrication of tanks. All these constitute the value of this work un....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure of 'Supply' i.e. whether the questioned supply tantamount to 'Supply of Goods' or 'Supply of Service' on the basis of the facts of the whole activity as mentioned above and supported by the documents enclosed/discussed here under? II. Whether Circular No. 126/45/2019-GST dated 22/11/2019 shall at all apply in the instant case if answer to Query (a) is 'Supply of Service' as job work service? III. What should be the Correct HSN/SAC code applicable to the said supply? IV. What is applicable Rate of Tax of GST based on answers of queries mentioned in above Queries? 11. The applicant is engaged in fabrication of tanks from steel sheets supplied free of cost by M/s IOCL and during the process, the applicant also use self procured items (Angle stuffners, Hexagonal bushings, nozzle, lifting eyes, brackets, hexagonal heads, turn buckles, MS Plate, angle rings, earthing boss connection, pad plate, aluminum dip rod, nut bolts) and consumables such as welding electrodes & gas etc. The applicant also carry steel plates from M/s IOCL to their works and fabricated tanks are delivered by the party at the depot of M/s IOCL and both the activities involves transpor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ase that entire inputs required for fabrication of tanks are provided by M/s IOCL but substantial items are used by the applicant during the process. We are therefore of the view that the nature of supply in the instant case is supply of goods. 15. We are also convinced that the activity performed by the applicant in the process of supply of tank is not covered in the services by way of job work or in manufacturing service under Notification No. 11/17-CT(Rate) date 28.06.2017. The legislature has defined job-work and manufacture separately. As such, the legislature does not intend to cover a treatment or process resulting into a distinct commodity under the scope of job work. The steel plates and tank are different commodities and after processing on steel plates, a new product Tank has been manufactured which is distinct in name, character and use. The applicant has submitted in para 5.29 of Statement of relevant facts that in following cases, it has been ruled that the fabrication of tanks from steel plates provided on FoC basis is manufacturing of a new commercial product and were liable to excise duty. i. V.D. Engineering vs. Commissioner of Central Excise, Jabalpur....