TaxTMI 
TaxTMI 
TaxTMI 
2021 (12) TMI 607
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....17 Central Tax (Rate) as amended or at 18% in terms of entry no. 26(1v) of Notification no. 11/2017. 2. Whether activity of surface coating undertaken by the Applicant in the State of Maharashtra on old, worn out or used goods received from Customers is classifiable under service accounting code 9988 more specifically under code 998898 as job work activity chargeable to tax at 12% in terms of entry no. 26{id) of Notification 11/2017-Central Tax (Rate) as amended or under Service accounting code 9987 more specifically under code 998729 as repairs chargeable to tax at 18% in terms of entry no. 25(ii) of Notification no. 11/2017. At the outset, we would like to make it clear that the provisions of both the CGST Act 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 Oerlikon Balzers Coating India Pvt. Ltd., the app....
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....aid Notification. S. No. 24 covers Heading 9986, and is not relevant to the impugned services. Sr. No. 26 covers Heading 9988. Further, the Headings from 9981 to 9989 are covered under Section 8 i.e. Business and Production Services. Sr. No. 25 of the Section 8 in the Notification covers Maintenance, repair and installation (except construction) services and Sr. No. 27 covers other manufacturing services; publishing, printing and reproduction services,' materials recovery services. The applicable GST rate on the services covered under the said Headings was generally 18 percent with few explicit exceptions by way of full exemption or partial exemption to services in relation to agricultural produce, printing and stationery etc. 2.7 The Applicant for both the set of services considering, the following facts, discharged the GST at the rate of 18% for the period from 01.07.2017 to 30.09.2019. Applicant, accordingly for both the set of services supplied, considered 9988 as HSN code during the said period. 2.8 Central Government amended Sr. No. 26 of the Notification 11/2017 vide Notification 20/2019-C.T.(R) dated 30.9.2019 (effective from 1.10.2019) ('the Notification 20') so as to re....
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....on with coating services undertaken on original/new goods: 2.12 Considering the definition of the term job work is defined under Section 2(68) of the CGST Act, 2017, CB1C Circular No. 38/12/2018 - GST dated 26.3.2018 and basis the erstwhile service tax law, the activity of processing or working upon raw material or semi-finished goods supplied to the job worker so as to complete a part or whole of the process resulting in manufacture or furnishing of an article is covered within the ambit of job work. The only other mandatory requirement in terms of the definition is that the job worker needs to carry out the said activity on raw materials or semi-finished goods supplied by the principal. 2.13 Hon'ble Supreme court in the case of Maruti Suzuki Limited Vs. CCE, New Delhi, 2015 (318) E.LT. 353 (S.C) has also held that there is a distinction between processing and manufacture and that Electra Deposition (ED) Coating of anti-rust treatment to increase shell life of various component is merely a processing activity and not a complete manufacturing activity. 2.14 The activity undertaken by the Applicant fits the definition of Job work under the erstwhile as well as present law. Furthe....
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....r no. 126/45/2019 - GST dated 22.11.2019 has clarified that Sr. No. (id) will apply if services by way of treatment or processing is undertaken by a person on goods belonging to another registered person. On the other hand, the entry at item (iv) specifically excludes the services covered by entry at item (id), and therefore, covers only such services which are carried out on physical inputs (goods) which are owned by persons other than those registered under the CGST Act. Applicant undertakes process of coating on goods received from a registered person and as such entry no. 26(id) of Notification 11/2017 Central Tax (Rate) is applicable in their case. Argument in connection with coating services undertaken on old/worn out or used goods 2.21 Coating services undertaken on old/worn out or used goods restores or improves the functionality already created and possessed by the article or thing. Such activity restores the old or damaged goods into good condition and also improves the functionality of the said article. Thus, activity of impugned coating services on old and worn out tools/inserts/capital goods can be categorized as 'Job work in the nature of 'repairs'. 2.22 Applicant ....
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....maintenance and repair services of commercial and industrial machinery chargeable to tax at 18% under entry No. 25(ii) of Notification 11/2017. 2.26 Applicant does not differ on the classification or rate of duty proposed by the Department on services provided under Category 1 above. Applicant differs from the classification under SAC 998717 and rate of duty at 18% under entry No. 25(ii) of Notification 11/2017 as proposed by the Department on services provided under category 2 above. With respect to the department's conclusion that Coating activity undertaken on New / Original Goods received from end Users is in the nature of Alteration services, applicant submits that the Coating activity undertaken by the Applicant is in the nature of treatment or process undertaken on goods belonging to another registered person and as such cannot be taken outside the scope of SAC 9988 and sr. No. (id) of entry 26 of Notification 11/2017. 2.27 Further the inference drawn by the Department that Notification 11/2017-C. T (Rate), under entry No. 26, entails that the goods (on which manufacturing services are provided the physical inputs owned by others is also misleading and totally out of conte....
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....htly classifiable under SAC 998717 as Maintenance and repair services of commercial and industrial machinery. Applicant submits that SAC under heading 998717 does not cover alteration services and as such the coating activity cannot be placed under the said heading. Further inferences from other headings cannot be the basis for classification of services under another heading. 2.31 SAC under heading 998873 clearly covers 'Coating services' and as such needs to be taken as the reference point for classifying the activity undertaken by the Applicant. Basis above submissions, Applicant pleads that coating activity undertaken on new goods received from end users are also covered under the scope of job work 'activity classifiable under SAC 9988 and as such chargeable to tax at 12% under sr. No. (id) of entry 26 of the Notification 11/2017. Applicant differs from the classification under SAC 998717 and rate of duty at 18% under entry No. 25(ii) of Notification 11/2017 as proposed by the Department on services provided under Category 3 above. Section 2(68) of the CGST Act, 2017 does not make any distinction between new goods or old / worn out goods for the purpose of categorizing any act....
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....rs of such goods. this office is of the view that these "new goods" cannot be categorized as physical inputs upon which any process of manufacture is being performed. Here, it is pertinent to quote an excerpt from Circular No.38/12/2018, dated 26/06/2018 which reads as below: "the jab worker is expected to work on the goods sent by the principal (manufacturer and not the end user) * and whether the activity is covered within the scope of job work or not would mean to be determined on the basis of facts and circumstances of each case". It appears that, new goods supplied by the End Users are subjected to the process of alteration intended for enhancing their life, efficiency, strength and performance but not as a part of manufacture. Therefore, the coating service provided by the applicant in this case does not appear to qualify for being a Manufacturing Service and in turn not as Job Work either. Hence, in view of this, this service cannot he classified under the SAC: 9988. Further, though there is no specific SAC attributed to alteration service provided by the applicant under section 8 of chapter 99, references can be drawn from other SAC Headings wherein alteration services a....
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....erson. On the other hand, the entry of item (iv) specifically excludes the Services covered by entry at item (id), and therefore, counts only such services which are carried out on physical inputs (goods) which are owned try persons other than those registered under the CGST Act." Upon going the excerpt from the cited circular, there should not be any trace of doubt that entry no. 26(iv) of Notification No. 11/2017-C.T (Rate) is applicable to manufacturing services provided only to the unregistered persons under the CGST Act, 2017. 3.2 Comments on Question No. 2 are as under:- A. In respect of question no. (2), the applicant themselves submit that the old, used or worn-out goods are not sent by their customers for carrying out any part of the process of manufacturing, but to restore their functionality and thus rendering them reusable for customers. Thus, the inherent contradiction in the stance of applicant is evident. Further, every Job Work is essentially a Manufacturing Service which in turn is the services performed on physical inputs owned by units other than the units providing the service. As such, they are characterized as outsourced portions of a manufacturing process ....
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....mitted by the applicant) which does not mean that the "nature" of activity is also the same, since the process on the new goods supplied by the OEMs is in the nature of "Manufacturing Services (Job Work)" whereas the process on the old goods is in the nature of "Repair Services" as discussed in the paragraphs above. 04. HEARING 4.1 Preliminary e-hearing in the matter was held on 10.12.2020. Shri. Raveendra Pethe, CA, Shri. Ashok Gohel, DGM, Finance and Shri. Vivek Pandit, CFO appeared, and requested for admission of the application. Jurisdictional Officer was absent. 4.2 The application was admitted and called for final e-hearing on 05.10.2021. The Authorized representatives of the applicant, Shri. Ashok Gohel, DGM, Finance, Shri. Raveendra Pethe, CA and Shri. Sunil Kumar, CA were present. The learned Jurisdictional officers Shri. Parthi, Asst. Commissioner, Div-III, Bhosari and Shri. Madhukar Gajdhane, Superintendent, Div-III, Bhosari were also present. 4.3 Heard both the sides. 05. OBSERVATIONS AND FINDINGS: 5.1 We have perused the documents on record, facts of the matter and submissions made by both, the applicant as well as the jurisdictional officer. 5.2 The applicant u....
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....ssions also, during the course of the online hearing, the coating process undertaken by them only increases the life span, efficiency, strength and performance of the automotive components new/original supplied by their principal manufacturers viz. the OEMs etc. and does not result in any new product. We also observe that no new product emerges after the subject process has been carried out by the applicant. The basic characteristics of the product have not been lost. Thus, in view of the contention of the applicant that they are a job worker, we now discuss the specific issue hereon. 5.5.5 Job work is just a process undertaken by a job worker on goods belonging to a principal. Job-work may or may not amount to manufacture. Further, a job worker may or may not use some portion of his material. Job work has been defined under section 2(68) of the CGST Act, 2017 to mean 'any treatment or process undertaken by a person on goods belonging to another registered person and the expression "job worker" shall be construed accordingly'. 5.5.6 Whereas the term 'manufacture' has been defined under section 2(72) of the CGST Act, 2017 to mean "processing of raw material or inputs in any manner....
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....ring services on physical inputs (goods) owned by others) (i) Services by way of job work in relation to (a) Printing of newspapers; (b) Textile yarns (other than of man-made fibres) and textile fabrics; (c) Cut and polished diamonds; precious and semi-precious stones; or plain and studded Jewellery of gold and other precious metals, falling under Chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975); (d) Printing of books (including Braille books), journals and periodicals; (e) Processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975). Explanation.- "man made fibres" means staple fibres and filaments of organic polymers produced by manufacturing processes either,- (a) by polymerisation of organic monomers to produce polymers such as polyamides, polyesters, polyolefins or polyurethanes, or by chemical modification of polymers produced by this process [for example, poly(vinyl alcohol) prepared by the hydrolysis of poly(vinyl acetate)]; or (b) by dissolution or chemical treatment of natural organic polymers (for example, cellulose) to produce polymers such as cuprammonium rayon ....
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....Sub-section (i), vide number G.S.R. 1158 (E), dated the 15th September, 2017 as amended from time to time.'. 2.5 "(ia)Services by way of job work in relation 6 to- (a) manufacture of umbrella; (b) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 6per cent 6 "(ib) Services by way of job work in relation to diamonds falling under chapter 71 in the First Schedule to the Customs Tariff Act, 1975 (51of 1975); 0.75 (ic) Services by way of job work in relation to bus body building; 9 (id) Services by way of job work other than (i), (ia), (ib) and (ic) above 6 "(ii) Services by way of any treatment or process on goods belonging to another person, relation to- (a) printing of newspapers; (b) printing of books (including Braille books), journals and periodicals. "(c) printing of all goods falling under Chapter 48 or 49, which attract CGST @ 2.5 per cent. or Nil."; 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 @ 6per cent. 6 "(iii) Tailoring services 2.5 &n....
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....hat for the purposes of the proviso to Rule 57F (2), the inputs that were not ultimately used in the final product but were removed from the factory for home consumption remain the same despite ED coating and consequent value addition. We follow the law laid down in S. R. Tissues Pvt. Ltd.'s case and state that on account of mere value addition without more it would be hazardous to say that manufacture has taken place, when in fact, it has not. It is clear, therefore, that the inputs procured by the appellants in the present case, continue to be the same inputs even after ED coating and that Rule 57F (2) proviso would therefore apply when such inputs are removed from the factory for home consumption, the duty of excise payable being the amount of credit that has been availed in respect of such inputs under Rule 57A." 5.5.16 The activity of the Applicant fits the definition of Job work under the present law. Further in terms of the Apex Court's ruling also, activity of coating is only a process undertaken on goods. 5.5.17 In view of the above, we hold that the impugned services supplied by the applicant are in the nature of job work services, classifiable under Entry at item (id)....
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....ed products which were sold as such by the various manufacturers to the end users and have been used to an extent which has resulted in wear and tear. 5.6.4 Whereas, repairing of the goods signify working on some goods which are already in existence. The already existing goods (old and worn out) are worked on so that the defects get removed and the same are ready for reuse, again. There is no new product emerging. The supply of service in the subject case is nothing but repair done on some old and used product to make them reusable, to restore the old or damaged goods into good condition and also improve the functionality of the said goods, by the impugned activities. 5.6.5 The applicant, during the course of the online hearing has submitted that they receive old, used and worn out goods from end users and perform coating work on the same and are aware that the said process may be either treated as job work or repair. The applicant themselves submitted that, with respect to old, used or worn out goods, the process of coating done by the applicant remains the same, however the said goods are not sent by the Customers for carrying out any part of the process of manufacturing but to....
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....n the subject case there is no processing of raw material nor is there an emergence of a new product. Further, Job work is just a process undertaken by a job worker on goods belonging to a principal and may or may not amount to manufacture and the term "Job work" has been defined under section 2 (68) of the CGST Act, 2017 to mean 'any treatment or process undertaken by a person on goods belonging to another registered person and the expression "job worker" shall be construed accordingly'. 5.6.10 In the subject case, impugned goods are received by the applicant from end users who had already purchased the said goods as a finished product, used the same and after wear and tear happening on the said goods, have brought the same to the applicant for making the same usable again. The end users cannot be termed as "principal" in the subject case as referred to, in a Job work process. The above example of a Television set being made workable after some process carried out by a Television mechanic holds goods in the subject case. The conversion of used and worn out goods into reusable ones cannot be treated as a manufacturing or job work activity. 5.6.11 SAC 9987 covers under its ambit "....
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.... Central Goods and Services Tax Act, 2017. 2.5 Provided that credit of input tax charged on goods and refer to Explanation no. (iv)].services has not been taken [Please (ii) Maintenance, repair and installation (except construction) services, other than (i) above. 9 -- 5.6.12 In view of the above discussions, we hold that the subject activity undertaken on old and worn out goods received from the end users is an activity of repair and squarely falls under SAC 9987 and will attract 18% GST under Entry No. 25(ii) of Notification No. 11/2017 dated 28.06.2017, as amended. 5.6.13 The Applicant has also contended that the classification of the coating activity undertaken on old/used/worn out goods could also fall under service accounting code 998873 as metal treatment and coating services. 5.6.14 SAC 9988 covers manufacturing services on physical inputs owned by others. The services are characterized as outsourced portions of a manufacturing process or a complete outsourced manufacturing process. We have already held above that the coating services on the old and worn out goods like cutting tools and components is an activity of repair and squarely falls under SAC 9987. The coa....