Maharashtra Appellate Authority for Advance Ruling (AAAR) upholds the order of AAR, rules that supply of ‘electricity’ to related party upon conversion of ‘coal’ received from the latter, does not constitute ‘job-work’; Notes findings of AAR that proposed activity results in emergence of a distinct commodity and constitutes ‘manufacture’, which cannot be read into term ‘treatment or process’ as found in ‘job-work’ definition;
AAAR observes that, coal does not find a mention in Standard Input Output Norms (SION) in respect of Principal’s final product where instead, the term ‘Coke’ is mentioned; States that ‘job-work’, as defined under CGST/MGST Act, involves – (i) two persons, (ii) goods, and (iii) process / treatment thereon, and in terms of the procedure contained u/s 143 of CGST Act and Rule 45 of CGST Rules, “goods sent to the job worker should be the Inputs of the Principal”;
Thus, inputs being utilized by Principal for manufacture of finished goods are not the same which are sent to appellant, states AAAR while noticing that electricity is to be supplied by appellant through distribution system of MSEDCL; Consequently, holds that condition stipulated u/s 143 to bring back inputs into Principal’s premises is not satisfied since “return of the inputs after processing is not guaranteed if not allowed by the regulator or third person/entity” and “no one-to-one co-relation can be established vis-à-vis the receipt of the processed goods due to involvement of the third party”;
Referring to SC ruling in Prestige Engineering (India) wherein it has been held that additions or applications of minor items is permissible in job-work, AAAR states that while requisite details by appellant pertaining to quantity and value of material being utilized for conversion have not been furnished, nonetheless it appears that other materials used are not minor additions, hence ratio of said SC ruling is inapplicable;
However finding force in appellant’s reliance on CBIC clarification & FAQs and contention that CGST Act has widened scope of ‘job-work’ definition as compared to definition provided under Notification No. 214/86-CE and any treatment or process by a person on goods belonging to another registered person is ‘job-work’; Holds that processing on goods belonging to another person qualifies as job-work even if it amounts to ‘manufacture’ provided all requirements under the CGST/MGST Act are met.
Citation: [TS-287-AAAR-2018-NT]