2019 (3) TMI 1475 - AAR - GST

Supply or not - Job work - dispatch of consumable materials from the principal to the job worker - goods not returned physically as inputs , being consumed in the process of galvanising - compliance in terms of section 143(3) of the GST Act - whether the goods not returned can be treated as 'Supply' or not? - Held that - The goods that are used up in the galvanising process cannot be separated from the galvanised 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. Thus, the zinc, furnace oil or nickel exhausted in the process of galvanising 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.

Summary

Issues:
1. Admissibility of the Application
2. Interpretation of the term "inputs" under section 143(1)(a) of the GST Act

Admissibility of the Application:
The Applicant, a manufacturer of cable tray and ladder tray, sought an advance ruling on whether dispatching consumable materials like zinc, nickel, and furnace oil to a job worker for galvanizing should be treated as a supply if not returned within the specified time. The Authority found the application admissible as the issue was not pending or decided under any GST Act provision, and no objections were raised by the revenue officer.

Interpretation of the term "inputs" under section 143(1)(a) of the GST Act:
The Authority observed that the galvanizing process, an intermediate stage in manufacturing, involves sending goods to a job worker for treatment. While the physical return of goods like zinc and furnace oil may not occur due to consumption in the galvanizing process, the Explanation to section 143 extends the definition of "inputs" to include goods exhausted during intermediate processes. Referring to a precedent, the Authority emphasized that physically returning consumed goods is not required. Thus, the ruling stated that the return of galvanized goods fulfills the input return condition, and consumed materials need not be treated as a supply under section 143(3) if fully used in galvanizing.

This detailed analysis of the legal judgment provides insights into the issues of admissibility of the application and the interpretation of the term "inputs" under the GST Act. The ruling clarifies the treatment of consumed materials in the galvanizing process and emphasizes compliance with input return conditions.