2018 (12) TMI 1087 - AAR - GST

Supply or not - transfer of machines & moulds (capital goods), from the premises of the job-worker to another job-worker, which were originally received by said job-worker - Circular No. 637/28/2002-CX., dt. 08.05.2002 - Held that - From a reading of the Circular quoted by the applicant it is seen that nowhere it is mentioned that provisions of Rule 4(5)(b) of erstwhile Cenvat Credit Rules, 2004 for receipt back of such capital goods/ moulds by principal manufacturer within stipulated time lime of two years are not applicable. Transitional provisions - Section 141 of the CGST Act, 2017 - Held that - Applicant have contravened the above provisions of the Erstwhile CCR, 2004. The goods were not received back by them within the time frame mentioned above and they had also not reversed the credit availed in such case. Now that GST has been introduced in the year 2017, they want to avail the benefit of sending the said capital goods from their first job worker to their second job worker. As per the Cenvat Credit Rules, 2004, if the capital goods were not received back within two years from the job worker, the manufacturer had to pay an amount equivalent to the CENVAT credit attributable to the capital goods by debiting the CENVAT credit account - In this case, the capital goods have not been received back from the first job worker even after three years and it is felt that the first principal manufacturer has not paid the Central Excise duty or debit the CENVAT account. Since, the duty has not been paid, the applicant is liable to pay GST while transferring the capital goods from the first job worker to the second job-worker namely M/s. Vasanth Tools Crafts Pvt. Ltd. The provisions of Rule 117 (Transitional Provisions) of the CGST Rules, 2017 provide for tax or duty to be carried forward under any existing law or on goods held in stock on the appointed day. The applicant has not brought on record any details to show that either the first Principal manufacturer or the applicant has submitted the declaration electronically in FORM GST TRAN-I and included the said capital goods in his TRAN-I, as provided under Rule 117 of the CGST Rules, 2017 - Since the details regarding the subject goods have not been carried forward by the applicant or the first principal manufacturer from the earlier law to GST laws, the goods cannot now be brought Into the GST fold. It appears that neither they, nor the first principal manufacturer have carried forward the capital goods into the GST regime by following the procedure prescribed by Section 117 - Hence the subject transaction Of transferring the capital goods from the first job worker to the second job worker would be an independent and fresh transaction for which the same would be treated as supply of goods and will be liable to tax under the GST Laws. Ruling - The transfer of machines & moulds (being capital goods), from the premises of the job-worker to another job-worker, which were originally received by said job-worker under the erstwhile Central Excise Act, 1944 will constitute as supply under GST.

Summary

Issues Involved:
1. Whether the transfer of machines and moulds (capital goods) from one job-worker to another constitutes a "supply" under GST.

Issue-Wise Detailed Analysis:

1. Background and Facts:
The applicant, Silgan Dispensing Systems India Pvt. Ltd., sought an advance ruling on whether the transfer of machines and moulds (capital goods) from one job-worker to another under the GST regime constitutes a "supply." Initially, these capital goods were transferred to M/s. Shaily Engineering Plastics Limited by M/s. MWV India Pvt. Ltd. under the erstwhile Central Excise Act, 1944. Subsequently, the business, including the capital goods, was transferred to Aphrodite Packaging Solutions Pvt. Ltd., which later became Silgan Dispensing Systems India Pvt. Ltd. The applicant now intends to transfer these goods to another job-worker, M/s. Vasanth Tools Crafts Pvt. Ltd.

2. Applicant's Contentions:
The applicant argued that Section 141 of the CGST Act, 2017, which deals with transitional provisions, only applies to inputs and not capital goods. They contended that there is no specific provision under the transitional provisions for capital goods, and thus, the transfer should not entail any GST liability. They also referenced several case laws and CGST Circular No. 38/12/2018 dated 26.03.2018, which allows the movement of goods from one job-worker to another under a challan without GST.

3. Department's Contentions:
The department highlighted that the Cenvat Credit Rules, 2004, required capital goods to be received back within two years, failing which the manufacturer must pay an amount equivalent to the CENVAT credit. Since the capital goods were not received back within the stipulated time and no duty was paid, the transfer of these goods under GST would constitute a "supply." They also questioned whether the applicant or the original principal manufacturer had included these goods in their TRAN-1 forms under the GST regime.

4. Findings:
The Authority for Advance Ruling (AAR) noted that the applicant had contravened the provisions of the erstwhile Cenvat Credit Rules, 2004, by not receiving the goods back within the stipulated time and not reversing the credit. The AAR also observed that the applicant did not provide evidence of carrying forward the capital goods into the GST regime through FORM GST TRAN-1. Consequently, the transfer of these goods from one job-worker to another would be treated as a fresh transaction and constitute a "supply" under GST.

5. Conclusion:
The AAR concluded that the transfer of machines and moulds (capital goods) from the premises of one job-worker to another, originally received under the erstwhile Central Excise Act, 1944, constitutes a "supply" under GST. Therefore, GST is payable on such transfers.

Order:
The question of whether the transfer of machines and moulds (capital goods) from the premises of one job-worker to another constitutes a "supply" under GST was answered in the affirmative.