JOB WORK UNDER GST
Meaning of Job Work is ‘Any treatment or process undertaken by a person on goods belonging to another registered person’. The one who does the said job would be termed as ‘job worker’. That means the ownership of the goods rests in the hands of the principal and the job worker is responsible to do the process work on the goods specified by the principal.
In a recent ruling, the Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that The Tribunal viewed that the non-compliance of summons served under Section 131 of the Income Tax Act,
The assessee has filed formidable evidence to identify the contractors as well as the factum of incurring job work expenses as demonstrated by the income tax returns of the service providers. A Coram comprising of Shri Pradip Kumar Kedia, Accountant Member & Shri Narender Kumar Choudhry, Judicial Member observed that in the absence of any culpable evidence in possession of revenue, the job work expenses deserve to be allowed, on a standalone basis, as incurred in the ordinary course of business.
The services on Job works of goods owned by other registered persons attract 12% of Goods and Services Tax (GST) ruled by the Authority of Advance Ruling (AAR) of Chhattisgarh.
It was submitted that in the present case the applicant is a registered person and when they undertake fabrication/machining /painting/ activities on the goods belonging to another registered person (customer), then the nature of work of the applicant is Job Work.
The authority observed that the applicant is awarded with a Work Order by Rungta Mines Private Limited (Customer) for fabrication of Technological Steel Structures Grade for Rolled Sections and plates as per technical specification of Essar Construction (Work).
The bench of members Sonal K. Mishra and Rajesh Kumar Singh ruled that if the job works services on goods owned by another registered person attract 12 % and if it is an unregistered person, then 18%.
The Andhra Pradesh High Court while recently considering a writ petition, held that the services by way of job work in relation to manufacture of alcoholic liquor for human consumption should pay 18% GST under the Central GST Act, 2017. The division bench of the High Court held that, alcoholic liquor for human consumption does not constitute food or food product falling within Chapters 1 to 22 of First Schedule of Customs Tariff Act, 1975 hence the petitioner cannot demand for the respondent to pay of tax 5% instead of 18%.
The bench of Justice C. Praveen Kumar and Justice A.V. Ravindra Babu dismissed the writ petition thus ruled that “alcoholic liquor for human consumption” does not constitute food or food product falling within Chapters 1 to 22 of First Schedule of Customs Tariff Act, 1975, we hold that the petitioner is liable to pay tax at the rate of 18% in terms of Notification No.6/2021, dated 30.09.2021. Apart from that, it is also to be noticed that at no point of time, any exemption was specifically granted to “alcoholic liquor for human consumption”.
The Ahmedabad Bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) has held that no excise duty on goods manufactured on job work basis from old and used goods supplied by the principal supplier.
The Coram of, Mr. Ramesh Nair JM AND Mr. RAJU TM has observed that the department could not adduce any evidence to substantiate their allegation such as receipt of raw material by the job worker on their end to manufacture of fresh and new C.I. Moulds. The job worker has done all the transactions as per the challans and for the job work purpose invoices were raised. No invoice was raised in respect of the sale of the goods.
The Tribunal has held that“it is a settled law that manufacturers for the purpose of manufacturing their goods can clear their own generated scrap to the job worker and get the finished goods manufactured out of it in terms of Notification No.214/86-CE. Therefore, we do not find any reason why the department has proceeded to demand duty from the appellant when all the records and facts as revealed from the investigation clearly show that the appellant has been involved in the job work of making C.I. Mould from old and used mould/scrap supplied by their principal manufacturer. Accordingly, we do not hesitate in holding that the demand on this count is not sustainable”.
The Odisha Authority for Advance Rulings (AAR) has held that the activity of sending of raw materials by IOCL for the manufacture of industrial gas would not qualify ‘job work’ for the purpose of the Central Goods and Services Tax Act, 2017.
The AAR bench observed that M/s Praxair is manufacturing industrial gasses out of the raw material supplied by the applicant and the gasses so manufactured are exclusively used by the applicant. But, there is no specific job work agreement between the applicant and M/s Praxair. “No job work charges or any processing/conversion charges of inputs has been claimed by M/s Praxair as evident from the invoices raised to the applicant. Further, the manufacturing of gasses is not being done at M/s Praxair’s production plant’. Therefore, the concept of ‘Job Work’ is not present in the entire transaction,” the AAR said.
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that the cenvat credit is allowable to waste arising during manufacture or job work process under the Cenvat Credit Rules, 2004.
The Judicial Member Mr. Ramesh Nair observed that even if it is assumed that the subsequently received material after 180 days is part of the processed goods even then only due to delay in receipt Cenvat credit cannot be denied as the appellant was entitled for Cenvat credit as and when the input / processed goods received after 180 days therefore on both the count the cenvat credit could not have been denied or demanded by the Revenue.
The Ahmedabad Bench of Customs, Excise and Service Tax Appellate Tribunal (CESTAT) held that no service tax is payable on the job of manufacturing Plastic Jars, Containers in factory of service recipient as it is included in Job Work manufacturing and not Manpower Recruitment Service.
The Coram of Judicial Member Ramesh Nair and Technical Member Raju held that the activity carried out by the appellant is of Job Work manufacturing and not of Manpower Recruitment Service. The Tribunal observed that there are two requirements for determining whether a service is taxable under the category of manpower recruitment or supply agency. First of all, it should be provided by a manpower recruitment or supply agency and secondly it should be in relation to manpower supply or recruitment.
The Gujarat Authority of Advance Ruling (AAR) ruled that Petronet’s activity of re-gasification of LNG owned by its GST registered customers amounts to rendering of service by Job Work and 12% GST payable.
The Coram of Sanjay Saxena and Arun Richard held that Petronet’s activity of re-gasification of LNG owned by its GST registered customers amounts to rendering of service by way of Job Work and merits to be covered at entry ‘id’ of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended, liable to CGST at 6% .
The Karnataka Authority of Advance Ruling (AAR) ruled that 12% GST on job work services such as anodizing, plating, on goods/materials belonging to registered persons.
The Coram of M.P.Ravi Prasad and T.Kiran Reddy ruled that The job work services undertaken by the applicant by way of treatment or processing such as anodizing, plating, on the goods / materials belonging to the registered persons are covered under clause (id) of entry number 26 of the Notification No.11/2017-Central Tax (Rate) dated 28.06.2017, as amended and accordingly attract GST rate of 12%.
The Karnataka Authority of Advance Ruling (AAR) ruled that 12% GST payable on job work services undertaken on the goods belonging to the registered persons.
The Coram of M.P. Ravi Prasad and T. Kiran Reddy ruled that the job work services undertaken by the applicant on the goods (physical inputs) belonging to the registered persons are covered under clause (id) of entry number 26 of the Notification 11/2017-Central Tax (Rate) dated 28.06.2017, as amended and accordingly attract GST rate of 12%.
The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) quashed the demand of 6% of value of exempted service as job work is incidental and ancillary to manufacturing and not Service.
The Coram of Judicial Member, Dr. Suvendu Kumar Pati noted that the work undertaken by the appellant was part of the process of manufacturing and not a service rendered by it to the ultimate manufacturer. “The appeal is allowed and the order passed by the Commissioner (Appeals) is hereby set aside exempting the appellant from the liability to pay the amount or interest and penalty confirmed in the adjudication process,” the court ordered.
The Maharashtra Authority of Advance Ruling (AAR) held that 5% GST on Job work services by Garware industries.
The Coram of Members Rajiv Mago and T.R.Ramnani ruled that the Impugned services provided by the applicant falls under clause (id) Heading 9988. “Since no new product comes into existence after the process conducted by the applicant on the raw materials supplied by GPL, therefore the process undertaken will come under the purview of job work as defined under Section 2 (68) of the GST Act, 2017. Thus, in view of the above we find that, the applicant is only a job worker to GPL and as a job worker, carries out processes on goods i.e. Polyester Films supplied by the principal i.e. GPL,” the AAR noted.
The Gujarat Authority of Advance Ruling (AAR) held that 12% GST on Activity of re-gasification of LNG owned by GST registered customers amounts to the rendering of service by way of Job Work.
The Coram of Arun Saxena and Arun Richard ruled that Petronet’s activity of re-gasification of LNG owned by its GST registered customers amounts to the rendering of service by way of Job Work and merits to be covered at entry ‘id’ of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended, liable to CGST at 6%.
The Gujarat Authority of Advance Ruling (AAR) ruled that the Services by way of job work on pharmaceutical Drugs attracts 12% Goods and Service Tax (GST).
The Coram of Sanjay Saxena and Arun Richard ruled 12% GST is payable on Services by way of job work on Diphenylmethoxy ‘N’ N-dimethylaminoethanol HCI (Job work of pharmaceutical Drugs).
The Kerala Authority of Advance Ruling (AAR) ruled that Tanker bodybuilding on job work basis, on chassis supplied by the customer is Supply of Services and 18% GST is payable.
The Coram of Joint Commissioner of Central Tax, Shiva Prasad, and Additional Commissioner of State Tax, Senil A.K.Rajan observed that the activity of tanker bodybuilding on the chassis supplied by the customer is a supply of service. “The activity is liable to GST at the rate of 18% as per entry at SI No. 26 (iv) 9988 “Manufacturing services on physical inputs (goods) owned by others Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above” of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017,” the AAR said.
The Karnataka Authority of Advance Ruling (AAR) ruled that 12% GST is applicable on Job work of Thermal spray/metal or metal alloy coating on goods belonging to another person if the principal is registered.
The Coram consists of Dr. M.P.Ravi Prasad and Mashood Ur Rehman Farooqui ruled that the job work engaged through the petitioner is comes beneath item (id) of SL.No.26 of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017, if the owner of the goods is enrolled beneath CGST and imposed with 12% GST and if the same is not being enrolled the impugned job work will cover beneath item (iv) of SL.No.26 of Notification No. 11/2017- Central Tax (Rate) dated June 28, 2017, and attracts 18% GST.
The West Bengal Authority of Advance Ruling (AAR) ruled that 12% GST is applicable on a mixed supply of the job work and works contract.
The AAR observed that the contract combines two separate services namely the job work of fabrication of steel structures and delivery thereof at the site with incidental supply of paint, and works contract of applying a coat of paint to the steel structures after erection.
The Maharashtra Authority of Advance Ruling (AAR) ruled that the conversion of waste sand to usable reclaimed sand can be regarded as manufacture and distinct from job work.
The Authority has ruled that conversion of waste sand sent by principal to job worker by the latter to get sand which is usable in foundries would be a process which has to be regarded as manufacture. This cannot be regarded as mere job work. Consequently taxability of the final product as goods would be appropriate. The waste sand received at NIL value from principal can also be said to influence the value of the final product where it was found to be marginally lower than market price for fresh sand.
The Customs Excise & Service Tax Appellate Tribunal (CESTAT) of Ahmedabad held that the charge of abatement for evasion of duty on job work.
The Bench also observed that the issue of whether metalizing is the amount to manufacture has been decided in favor of the assessee in the case of Metlex India Pvt. Ltd. Vs Commissioner of Central Excise, New Delhi, 2004 (165) E.L.T.129 by the Supreme Court and no contrary judgment of Hon’ble Supreme Court is available. In the light of the judgment in Thermax Babcock & Wilcox Ltd. V/s C.C.E. Pune 2018 364 ELT 945 (Tri.-L.B.). held that metalizing of the film is not the amount to manufacture and if there was any non-payment of duty by MGM neither M/s. Rivaa Export Ltd. nor its employees can be made responsible.
The Authority for Advance Ruling (AAR), West Bengal has held that the goods sent for job work but not returned being consumed in the process is supplied and therefore, is liable to GST.
The AAR noticed the decision in Rahee Infratech Ltd wherein CESTAT, Kolkata Bench decided a similar question in the context of Cenvat credit. In that case, the Tribunal refused to allow Cenvat credit on the zinc sent to the job-worker for galvanizing on the ground that the said zinc had not been returned along with the galvanized steel structures.
“The goods that are used up in the galvanizing process cannot be separated from the galvanized goods. The meaning attributed to ‘inputs’ in the Explanation to section 143 takes care of the difference between the inputs sent to the job-worker and the goods returned after some intermediate treatment/process like galvanisation that may exhaust some of the inputs sent out. It expands the meaning of ‘inputs’ to the intermediate goods that include, as embedded, attached or consumed, the inputs that are exhausted in the process of manufacturing the intermediate goods. So, the zinc, furnace oil or nickel exhausted in the process of galvanizing need not be physically returned. If the galvanized structures are returned that will be sufficient compliance of section 143(1)(a) of the GST Act,” the Tribunal said.
The Chattisgarh Authority of Advance Ruling in an application filed by M/s. Taranjeet Singh Tuteja & Brothers ruled that a contract for custom milling involves transportation of paddy. Hence, custom milling being the principal supply attracts 5% GST by virtue of being ‘Composite Supply’ under Chhattisgarh Goods and Services Tax Act (CG GST Act, 2017).
The bench consisted of Shri. S.K. Buxy and Shri. Rajesh Kumar Singh while analyzing the relevant provisions points out 3 service supplies rendered by the applicant. These include: milling of paddy, transport of paddy and rice and incentive for custom milling of paddy. The Authority while ruling for the applicant’s contention of ‘exemption’ went to examine the meaning of ‘subsidy’ to be related with State welfare of the public and which is extended to the public at large. It ruled that the present service is not a ‘subsidy’ but ‘incentive’. With regard to the treatment of transportation supply of paddy and rice, it was pointed out that the contract with MARKED was primarily for custom milling which involves transportation of paddy. Hence, this makes custom milling the ‘Principal Supply’ attracting 5% GST by virtue of being ‘Composite Supply’.
The Andhra Pradesh Authority of Advance Rulings in an application filed by M/s. Synthite Industries held that the process of providing job work service to foreign customers is taxable at 18% under the Andhra Pradesh GST Act.
The Authority referred to Section 2(68) of the Central Goods and Service Tax Act, 2017 (CGST) defining ‘Job Work’. It is ‘any treatment or process undertaken by a person on goods belonging to another registered person’. Further, the one who does the said job would be termed as a ‘Job Worker’. Also, the ownership of the goods does not transfer to the Job Worker but it rests with the Principal. The Job Worker is required to carry out the process specified by the Principal, on the goods. The bench consisted of Sri. J.V.M. Sarma and Sri. Amaresh Kumar as members held that the process of providing ‘Job Work’ service to the foreign customer as in the present case in the premises of the applicant as per the specifications of the recipient of services is taxable under the Andhra Pradesh GST Act at a rate of 1
Delhi bench of Income Tax Appellate Tribunal in DCIT versus M/S Dynamic Transmission Limited while dismissing the appeal of Revenue held that job work charges received from the assessee’s eligible unit can be deducted under section 80IC of the Income Tax Act.
Finally bench noted that “it cannot be denied that the assessee received job work charges from the manufacturing process through which a new product has emerged from the raw material supplied by its customers” In the light of decision in assessee’s own case has allowed the deduction under Chapter VIA u/s. 80-IC and also the ITAT New Delhi bench in ITO vs. Zeon Lifesciences Ltd. wherein held that assessee job work charges have to be treated as manufacturing activity, and it is not envisaged u/s. 80-IC to maintain separate books of account for manufacturing on his own account and for job work.
Mumbai CESTAT, last week allowed Cenvat credit on security services utilized at the premises of the Job workers and paid by assessee under Rule 3 of the CENVAT Credit Rules.
The Tribunal noted that “the definition of input services nowhere specifies that the services have to be received and utilized within the factory. This position has been clearly held by the Tribunal in the case of Maharashtra Seamless Ltd. Rule 3 of the CENVAT Credit Rules specifically provides that credit of tax paid on any input service, used in the manufacture of intermediate products, by a job worker availing the benefit of exemption specified in Notification No. 214/86-C.E. be allowed. I find that the orders relied upon by the departmental representative have not examined the express provision under Rule 3 of Cenvat Credit Rules or the recent clarification dated 19-1-2010 (supra) issued by C.B.E. & C. in the matter.
In a recent ruling, the CESTAT Bangalore held that Cenvat Credit on the amount of Service Tax paid on the immovable property to his job worker.
The bench noted that the lower authorities erred in not appreciating the correct position of the law as per Rule 3 of CENVAT Credit Rules, 2004. “The said provisions of Rule 3(1) of the CENVAT Credit Rules, 2004 specifically provided for availment of CENVAT credit by a manufacturer or producer of final products in respect of any, discharge of duties or taxes or cess paid on any input or input services, as the case may be, used in the manufacture of intermediary products, by a job worker availing benefit of exemption specified in the Notification No.214/86-CE of Government of India and the said goods are received by the manufacturer for use in or in relation to manufacture of final product. It is undisputed that the case in hand, appellant has received back the intermediary products on which job working has been undertaken by the job worker who has followed provisions of Notification No.214/86-CE.”
In M/s.Hitachi K.K.Manufacturing Co v. CCE, the Kolkata bench of the CESTAT held that while computing SSI limit under the Central excise law, value of the goods obtained on the job-work basis should not be included in the turnover.]
The bench found that during the relevant period, the appellant was manufacturing salable goods. Some goods were obtained by supplying the raw materials to outside individuals/units. The bench noticed that in the case of Ujagar Prints, ETC. ETC. v. Union of India & Others, the Apex Court held that a job-worker is manufactured for the purpose of the Act and the value of the goods will be considered in his hand. Quashing the order the bench said that “Hence, as per the ratio laid down by the Supreme Court, the value of the goods obtained on the job-work basis cannot be included into the turnover of the appellants. By excluding this value the items manufactured by the appellants comes below the limit prescribed for the S.S.I. Exemption.”
The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), while allowing an appeal filed by a Job Worker of Hindustan Coca Cola Beverages Pvt. Ltd, held that the service tax cannot be levied on the fixed components of job charges.
While allowing the appeal, Judicial Member Anil Choudhary and Technical Member P Anjani Kumar found that the appellant had actually entered into an agreement for manufacture on a job work basis. “Evidently, as per the agreement the job charges have been spread over in two tier billing i.e. fixed charges and variable charges. The reason being that in the summer season there is more demand for packed water and beverages, whereas in other months, the demand is lower. Keeping in view the constant availability of funds to meet the fixed charges and finance charges and for variable cost towards job charges, two tier billing has been provided, to the appellant job worker to meet the financial obligation round the year. Admittedly, appellant has paid the excise duty on the goods manufactured and cleared for the principal manufacturer, as is evident from the copy of excise returns filed before the Tribunal. In this view of the matter, we conclude that the job charges received by the appellant have formed part of the cost of manufacture, which have suffered excise duty. Accordingly, we hold that service tax cannot be levied on the fixed components of job charges,” the Tribunal said.
The Customs, Excises, and Service Taxes Appellate Tribunal (CESTAT) held that the service of Hiring of workover rigs can not be taxed under the category of ‘Maintenance, Management and Repair service’.
“We also agree with the submission that the said services have been appropriately brought within the tax net subsequent to the period in dispute under the category of Mining service or Supply of tangible goods, as the case may be. In view of the above findings, we are of the view that the impugned demand raised in the category of ‘Maintenance, Management and Repair service’ cannot be sustained and hence, set aside,” the CESTAT said.
The Uttar Pradesh Authority of Advance Ruling (AAR) ruled that activity of bus body building is supply of goods and services depending on the principal supply.
The Coram of Vivek Arya and Abhishek Chauhan ruled that in the case of bus body building there is supply of goods and services. Thus, classification of this composite supply, as goods or service, would depend on which supply is the principal supply which may be determined on the basis of facts and circumstances of each case. “We find that all inputs required for fabrication of vehicle-body (Tippers, Trailers, Truck, Tankers) on chassis are procured by the applicant and fabricated vehicle-body mounted on the chassis is supplied by the applicant. Therefore, in the instant case, it is a supply of body of the vehicle and the activity of fitting/mounting of vehicle-body on the chassis is an ancillary activity to the principal activity of supply of vehicle-body. Hence, in terms of the clarification issued by the CBEC vide Circular No. 34/8/2018-GST, dated 1-3-2018, the impugned activity is a composite supply, with principal supply being supply of body of the vehicle,” the AAR ruled.
The Maharashtra Authority of Advance Ruling (AAR) held that the Process undertaken is covered under job work if no new product comes into existence and 12% GST is payable on job work.
The Coram of Members Rajiv Mago and T.R.Ramnani ruled that since no new product comes into existence after the process conducted by the applicant on the goods supplied by its principals, therefore the process undertaken will come under the purview of job work as defined under Section 2 (68) of the GST Act, 2017. Thus, the applicant is only a job worker and as a job worker, carries out processes on goods supplied by its principals.
The Authority further said that Notification No. 20/2019- Central Tax (Rate) dt. 30.09.2019 where GST Rate on Job work is reduced to 6% from 9% is applicable to the firm.
The facts briefly are that the applicant DCPL is engaged in the manufacture of excisable goods falling under chapters 52,54,55 of Central Excise Tariff Act. During the relevant time the applicant was receiving inputs from M/s Virendra Processors Pvt. Ltd. who are themselves engaged in the manufacture of processed fabrics. M/s DC Polyester Ltd. processes the inputs thus received on a job work basis and sends them back to M/s Virendra Processors Pvt. Ltd. without payment of duty. The Department contends that return of fabrics after job work is under job work Notification No. 214/86 dated 25/3/86 which does not cover the processed fabrics falling under chapter 52,54,55 as final products in the table annexed to the said Notification and therefore duty is payable by the job worker (M/s. DCPL) at the time of removal of the processed goods from their factory. In other words Notification No. 214/86 is inapplicable to fabrics. The Commissioner, therefore demanded the said duties and imposed penalties both on the job worker and the principal manufacturer.
The ld. Commissioner however held that the applicant before her did come under the gamut of Notification No. 214/86 and the claim that the movement of inputs is covered by CENVAT rules is not correct in view of their own declaration that they are receiving inputs under Notification No. 214/86.
The facts of the case are that the appellant M/s. Vandana Dyeing Pvt. Ltd., received fabrics falling under Chapters 52, 54, 55 and 58 of the Central Excise Tariff under Rule 4(5)(a) of the Cenvat Credit Rules, 2002 and undertook the process of washing and stentering, and thereafter the goods were returned to the supplier of the fabrics. However, they did not discharge any excise duty liability on the goods processed. The department was of the view that, since the process of entering amounts to manufacture, the appellant as a job -worker, should have discharged excise duty liability on the processed fabrics and, therefore, show cause notice was issued proposing to demand duty which was confirmed by the adjudicating and appellate authorities.
held that where there is contract for milling of paddy along with cost of transport, supply of packing materials, and incentives it will be treated as composite supply and contract of milling will be treated as principal supply.
the chassis which is supplied by the customers of the applicant and in fact no treatment or process is undertaken by the applicant on the chassis itself, except fitment/mounting of the bus body on the same. At the same time, bus body building involves use of raw materials/inputs etc., for manufacture/fabrication of bus body and the cost of these inputs, etc., do form the part of value which is being charged by the applicant from its customers. From the contents of the agreement dated. 08.08.2013 between the applicant and M/s Uttarakhand Transportation Corporation, Dehradun, as supplied by the party, it is observed that the description of supplies to be made/work done, is as under:- Fabrication of ordinary bus body on TATA LP 1512/42 TC BS III (166″W/B) chassis (60% ROH) w/o passenger seat as per broad specifications provided by UTC.
The facts of the present case are that the assessee filed a refund claim for Rs. 2,48,843/- on 23.12.2010 seeking refund of erroneous payment of service tax stating that they had paid the said amount under wrong accounting code and the same could not be utilized for payment of service tax under the code and hence opted for refund. The refund claim is beyond the time limit of one year in terms of section 11B of Central Excise Act 1944 made applicable to service tax under section 83 of Finance Act, 1994. After due process for adjudication by the adjudicating authority, the said refund was rejected vide order-in-original No.4/15 dated 24.09.2015 as time bar in terms of section 11B of Central Excise Act, 1944. However, he has still remanded the case back to the original adjudicating authority for fresh adjudication since the refund claim has not been examined in the light of all the parameters.
The Court held that the Supply of goods in the processing of goods of others is composite supply where the main supply is supply of manufacturing service on goods owned by others.
The Maharashtra Authority of Advance Ruling (AAR) ruled that the conversion of waste sand to usable reclaimed sand can be regarded as manufacture and distinct from job work.
The Authority has ruled that conversion of waste sand sent by principal to job worker by the latter to get sand which is usable in foundries would be a process which has to be regarded as manufacture. This cannot be regarded as mere job work. Consequently taxability of the final product as goods would be appropriate. The waste sand received at NIL value from principal can also be said to influence the value of the final product where it was found to be marginally lower than market price for fresh sand.
In this case a body is built on a job work basis by using own inputs and capital goods on chassis provided by principal, activity amounts to supply of service. In case the body of standardized vehicles is built without chassis and the same is subsequently mounted on chassis, it amounts to composite supply of goods.
Repairing defective transformers involves transfer of property in goods. Contribution not limited to labor, skill done with the help of his own tools, gadgets or machinery. Supply of goods constitutes a major portion of the value of the supply. The process is not job work. To be treated as a Repair activity.
Activity of the Appellant is manufacture which cannot be read into the words ‘treatment or process’ as found in the definition of ‘job work’ Since JEL and JSL are related parties, any supplies made between them, even without consideration will be subject to GST. M/s. JSW Energy Ltd. [2018 (14) G.S.T.L. 571 (App. A.A.R. – GST)] Benefit of job work also available if the treatment or process amounts to manufacture. Steam coal, not the inputs for Principal, i.e., M/s. JSL for their final product, i.e., Steel as they are utilizing coal other than steam coal; Electricity so produced supplied to Principal, i.e., M/s. JSL only through a third party, i.e., MSEDCL; No one-to-one correlation can be established vis-à-vis the receipt of processed goods due to involvement of a third party.
It was held that when substantial materials are supplied by a job worker, then the process is not job work. However, minor goods can be used. The decision of Prestige Engineering was much before Noti.no.214/86-CE.
The Delhi Tribunal held that the decision of SC lost its relevance and neutrality theory is also important to be considered in the CENVAT regime. Similar view was expressed even in the case of CCE Vs. Abhinav Chemicals, 2012 wherein Delhi Tribunal held that there is no restriction on using materials by job workers. Value of material used/skill and labor applied by them and value of input supplied by customer is almost equal. The Authority opined that this is a clear case of supply of goods, i.e. ready to use sugar mill roller. Valuation as per Rule 27. [S.B. Reshellers Private Limited’ – 2019 (27) G.S.T.L. 120 (A.A.R. – GST)]
In case a body is built on a job work basis by using own inputs and capital goods on chassis provided by principal, activity amounts to supply of service. In case the body of standardized vehicles is built without chassis and the same is subsequently mounted on chassis, it amounts to composite supply of goods.
Mounting or fabrication of bus/truck/ ambulance body on chassis supplied by OEMs/Principal on delivery challan or any other owner of chassis by collecting job work charges including inputs required for such fabrication work without transferring the ownership of chassis to job worker – Activity amounted to job work.
Where the principal material i.e. paper and paperboard belong to the applicant, on which the content supplied by the customer is printed and the finished goods are supplied, and AAR Ruling: Since the printing would be the principal supply of the composite supply,, the entire composite supply would be treated as a supply of services by way of printing (principal supply) and the tax rate applicable to such printing would be applicable on the entire value of such supply. Where the principal material i.e. paper and paperboard belong to the customer, on which the content supplied by the customer is printed and the finished goods are supplied. AAR Ruling: Amounts to job work and taxable accordingly.
Natural gas, DM water sent to manufacture Hydrogen, Nitrogen. Held even if manufactured, it is job work Value of material used/skill and labor applied by them and value of input supplied by customer is almost equal. The Authority opined that this is a clear case of supply of goods, i.e. ready to use sugar mill roller. Valuation as per Rule 27. [S.B. Reshellers Private Limited’ – 2019 (27) G.S.T.L. 120
by order DT 4.9.2018 The Court held that Manufacture of beer by party for principal is taxable under GST law as service.
Gujarat authority for advance ruling held by order dt 11.08.2021 that activity of re-gasification of LNG owned by its GST registered customers amounts to rendering of service by way of Job Work and merits to be covered at entry ‘id’ of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended, liable to CGST at 6%..
Gujarat authority for advance ruling held by order dt 21.03.2018 The applicant has entered into a Job Work Agreement dated 07.02.2014 with M/s. Essar, in terms of which the applicant acts as a job worker for M/s. Essar which undertakes to provide the necessary goods such as Electricity, Industrial quality water to the applicant on a free-of-cost basis, using which the applicant manufactures industrial gasses (Oxygen, Nitrogen and Argon) for Essar on Job Work basis .This activity undertaken by the applicant falls under the ‘Job Work’ as defined under Section 2(68) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act,
Kerala Advance Ruling Authority by order dt 20 .10.2018 held that the activity undertaken by the applicant of processing natural gas and other inputs received from BPCL free of cost basis and manufacturing industrial gasses from them shall fall under the scope of ‘job work’ under GST.
The fact that M/s. Thermax Babcock was the principal manufacturer who removed inputs to M/s. Thermax (job worker) for manufacturing of intermediate goods i.e. boiler parts which were to be used by the principal manufacturer in the manufacture of final product remained undisputed. M/s. Thermax as a job worker manufactured boiler parts for M/s. Thermax Babcock used the inputs supplied to it and cleared the same back to M/s. Thermax Babcock who used such intermediate goods in manufacture of final products but did not pay any duty on clearance of such final products.
Revenue has placed reliance upon the Tribunal judgment in case of M/s. Facit Asia Ltd. v. CCE – 1991 (54) E.L.T. 347 (Tri.). Tribunal was seized of the question as to whether the duty paid by the job worker is available to the principal manufacturer when the job worker could have availed exemption under Notification No. 214/86- C.E. T
Revenue has also relied upon the judgment of the Apex Court in case of M/s. Empire Industries Ltd. v. UOI – 1985 (20) E.L.T. 197 (S.C.) holding that neither hardship nor loss of benefit is criteria in fiscal statutes as the job worker is liable to pay duty. Further, that the job worker being manufacturer of intermediate goods is liable for duty as has been held in case of Britannia Biscuit Co. Ltd. v. CCE, Madras – 1997 (89) E.L.T. 22 (S.C.). Therefore it is settled position of law that the job worker as the manufacturer of goods, unless otherwise exempted, is liable to pay duty. In the present reference, the undisputed fact being that the principal manufacturer did not pay duty and did not follow the procedure and conditions of Notification No. 214/86-C.E. supra, the job worker as a manufacturer is liable to duty on the job worked goods.
“The petitioner-company manufactures in its factory, panels lined with G.I. Sheets, Wooden flooring, Insulated doors lined with G.I. Sheets and cooling coils.”
The petitioners’ always represented that the cold room was erected only at the site and not at the factory which is found to be false. No where it was disclosed that the cold-room/cabinet was erected in their factory. Therefore, it cannot be said that the department knew that the cold room/cabinet was always erected in the petitioners’ factory. The decision of the Apex Court in the case of Hindusthan Ferroda (supra) is also distinguishable on facts. In that case it was held that the onus of establishing that the goods are classifiable under a particular tariff entry in on the revenue and if the onus is not discharged by the revenue, the classification filed by the assessee must be accepted. In the present case, the petitioners have not filed any classification list and their claim that the cold room/cabinet was not erected in their factory has been conclusive proved to be false. The revenue has brought on record material to establish that the petitioners have not filed the classification list in respect of the cold room deliberately with intent to avoid the payment of excise duty. Therefore, the decision of the Apex Court relied upon by the petitioners does not support the case of the petitioners.
The services are 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 or a complete outsourced manufacturing process. Since this Heading covers manufacturing services, the output is not owned by the unit providing this service- Therefore, the value of the services is based on the service fee paid, not the value of the goods manufactured.
From the above, it is clear that this heading covers those services characterized as outsourced portions of a manufacturing process. In the case at hand, the electroplating job done by the applicant is a portion of the manufacturing process of the customer of the applicant and therefore, the activity of the applicant is covered under SAC 9988.
The applicant is a Public sector undertaking operating oil refinery and producers of several petroleum products. For carrying out the refining activity of petroleum products, the applicant requires Industrial Gasses such as Hydrogen, Nitrogen and Steam. The industrial Gasses are obtained from inputs such as ‘Re-gasified Liquefied Natural Gas (RLNG), De-mineralized water (DM Water), Hydrogen Rich off Gas and raw water’. The applicant allowed M/s. Prodair Air Products Pvt Ltd to put up a facility for processing of industrial gasses on Build Own Operate basis. The applicant transports the inputs for processing through pipe lines to M/s. Prodair Air Products Pvt Ltd. The applicant proposed to execute a job work agreement with M/s. Prodair Air Products Pvt Ltd for processing and producing the industrial gases using the inputs provided by the applicant and sending back the processed industrial gas to the applicant.
The transport of the inputs from principal for processing through pipe lines to the premises of the job worker as well as return of processed goods after job work to the principal can’t be treated as taxable supply. Based on the observations stated above, the following rulings are issued:
The activity of the applicant of sending Regasified Liquefied Natural Gas (RLNG), De-Mineralized Water (DM Water), Hydrogen Rich off Gas and Raw water free of cost to M/s. Prodair Air Products Pvt. Ltd. For manufacture of Hydrogen, Nitrogen and Steam manufactured out of its amount to ‘job work’ as defined under Section 2(68) read with Section 143 of the CGST/SGST Acts.
The Court held that Shell Energy India Private Limited (herein referred to as the Applicant) has submitted that it provides LNG re-gasification services to its customers and that the LNG is owned by its customers who are all GST registered Taxpayers.
Shell’s activity of re-gasification of LNG owned by its GST registered customers amounts to rendering of service by way of Job Work and merits to be covered at entry (‘id’) of Heading 9988 at Sl. No. 26 of Notification No. 11/2017-CT (rate) dated 28.06.2017, as amended, liable to CGST at 6% and SGST at 6%.
AAR held that it cannot be said that where an activity is undertaken on job work basis, it would be precluded from being considered as manufacturing. It is not as though the two are mutually exclusive. If in a given transaction, the raw material is supplied by the customer and the applicant charges only its making charges, it could well be a case of manufacture on job work basis. It is, therefore, our understanding that what the question seeks an answer to is whether the activities amount to „manufacture‟
M/s. Irene Rubbers is a job worker engaged in production of Rubber backed and rubber edged coir mats and polypropylene mats of various designs and sizes as required by the principal on the materials provided by the principal. The materials like coir mats and mattings covered under HSN 5702 and tufted carpets covered under HSN 5703 are supplied by the principal for executing job works along with molds in the required designs. The rubber compound required for the rubber backing and edging is prepared in a mixing mill. The petitioner cut the materials in desired size and mixed the material with molten rubber compound. Accordingly, the molten rubber compound and coir materials are fused/vulcanized perfectly with the aid of hydraulic press. Thereafter, the edges are cut for finishing and the finished product like rubber backend mat of coir, polypropylene of felt will be delivered to the principal.
The Court observed that the process and treatment carried out on the goods belonging to the principal and made available by the principal amounts to job work.Manufacturing services on physical inputs owned by the principal is treated as service by way of job work and is covered under SAC 9988.
The activity of job work carried out on the materials supplied by the principal falling under HSN 5702 & 5703 are taxable @ 2.5% CGST and 2.5% SGST vide Entry No.26(1) (b), Notification No.11/2017-Central Tax (Rate) & SRO.No.370/2017.
The facts are not in dispute. The respondents are engaged in the pro- cessing of fabrics given to them by the principal manufacturers on a job work basis. They undertake the pro- cess of heat setting and stentering on such fabrics sent to them by the principal manufacturers, under Rule 57F (3) of the Central Excise Rules, 1944. The Revenue Department raised the duty demand for the period Dec., 1995 to June, 1996 from them for this job work by serving them two show cause notices.
The Tribunal has taken a view that where the job workers after pro- cessing the fabrics received from the principal manufacturer had re- turned the same under Rule 57F (3)/57F(4) of the Rules, they will not be liable to pay duty on processed fab- rics. The ratio of the law laid-down in that case fully applies to the case in hand as the respondents as job workers undertook the process of
heat setting and stentering on the fabrics supplied to them by the principal manufacturers and returned the same to them, who then cleared on payment of duty.
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