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2020 (10) TMI 468 - AAR - GSTClassification of supply - Supply of Goods or Supply of Job Work Services - promotion of commercial activities relating to Foundry Industry preservation of environment through its Sand Reclamation Plants - impact of used waste sand which is of the value Nil , on valuation - HELD THAT - From a combined reading of the definition of job work and the procedure of job work as prescribed u/s 143 of the CGST Act and Rule 45 of Rules, it is the principal who will send inputs to the job worker for undertaking any treatment or process that may or may not amount to manufacture and will bring back same after the completion of job work. Thus the person who send goods to the job worker is a principal and the person who undertakes treatment/ processing is a job worker - In the present case applicants have received waste sand, having no commercial and market value, at their plants from the different foundries under the cover of Rule 55 Challans. Further, there is no commercial use of this waste sand. The used waste sand is stored at common pool Storage Location for production activity and it is not possible to segregate the sand as per the receipt from foundries. The finished reclaimed sand is obtained by applying different processing steps which is narrated by the applicant in their written contention. The finished product is different in character, name and use than the waste sand which is the input supplied. The emerged product has a commercial value, goods quality and is used by the specific foundry industry. The new product is manufactured from waste sand and has market value. The new product is kind of movable property. Considering the quality, composition, distinct character and use of the product emerges from the process and treatment undertaken, we find that the finished product satisfied the definition of the term Goods mentioned u/s 2 (52) of CGST Act. We do not hesitate io treat as this new product as Goods - the input received is waste material which is dumped at applicant s location due to environmental concerns. The foundries/Suppliers have supplied unusable and non-valuable material in the form of waste sand. The intention of the foundries/Suppliers is not to treat the waste sand as semi or finished goods for the purposes of further process. Actually waste sand is a raw material for the applicant and after the processing, usable sand is produced which is then sold to foundries as and when orders are received. The concept of job work already exists in Central Excise, a principal manufacturer can send inputs or semi-finished goods to a job worker for further processing. Applicant does not satisfy the conditions mentioned for the ta rm Job work u/s 2(68) of CGST ACT. Hence the activity carried out by the applicant is not covered under Job work services and is out of scope of supply of services. The applicant cannot be considered as a job worker within the meaning of Section 2(68) and Section 143 of the GST Act and corresponding rules. The real spirit of job work as explained by the court is that where the principal sends minor input to the job worker and all other inputs and goods utilized in the final products belongs to the job worker then the said process cannot be considered as a job work. In the case at hand applicant has accepted as a matter of fact that, the value is only of the material used/ skill and labour applied by them and the value of input supplied by the customer is nil - the subject transaction undertaken is a supply of goods, i.e. sale of ready to use sand for the foundry industry and not supply of job work services. Whether the used waste sand which is of the value Nil (Refer separate Valuation Certificate by Engineer) will have any impact on valuation? - HELD THAT - The value of input is considered by the applicant to be Nil is probably because they are not paying consideration for receipt of such used sand. In cases like in the subject matter, the value of inward supply will always have a bearing on the value of outward supply. In the subject case, the applicant has themselves admitted that the value of input used sand is NIL and the same has been accepted by the jurisdictional office also and not disputed - it appears from the applicant s submissions that their rate of ₹ 2.50 per kg. on output supply of sand has taken into account the valuation of input sand at NIL value. In normal situations, in the subject case, if there is a price attached to the input supply of used sand, then it may have a proportionate impact on the rate of outward supply of sand.
Issues Involved:
1. Whether the activity of the applicant is a Supply of Goods or Supply of Job Work Services. 2. Whether the used waste sand, which is of the value ‘Nil’, will have any impact on valuation. Issue-wise Detailed Analysis: 1. Whether the activity of the applicant is a Supply of Goods or Supply of Job Work Services: The applicant, involved in the promotion of commercial activities relating to the Foundry Industry and preservation of the environment through Sand Reclamation Plants, receives used/waste sand from various foundries. This waste sand, with no commercial value, is processed into reusable sand. The key steps in this process include receiving, storing, processing, and reclaiming the sand. The applicant contends that the activity should be considered as Supply of Goods rather than Job Work Services due to the nature of the process and the inability to correlate the reclaimed sand to the specific waste sand received from individual foundries. The definition of 'job work' under the GST Act is examined, which involves treatment or process on goods belonging to another registered person. The applicant argues that since the waste sand has no commercial value and the final product is a new commodity with distinct properties, the activity should be considered as manufacturing rather than job work. The jurisdictional officer supports this view, noting that the processed sand is a different commodity and the pricing indicates a supply of goods rather than a job work service. The judgment concludes that the applicant's activity satisfies the conditions of 'manufacture' under Section 2(72) of the CGST Act, as the process results in a new product with commercial value. The activity is thus classified as a Supply of Goods, not Job Work Services. 2. Whether the used waste sand, which is of the value ‘Nil’, will have any impact on valuation: The applicant seeks clarity on whether the 'Nil' value of the used waste sand affects the valuation of the final product. The jurisdictional officer submits that the inward value of the waste sand does not directly impact the outward supply value since the waste sand is valued at Rs. Nil. The applicant's understanding that the 'Nil' value of the used waste sand has no impact on the valuation is affirmed. The judgment agrees with the jurisdictional officer, stating that the value of inward supply will have a bearing on the value of outward supply. However, since the input sand is valued at 'Nil', it does not affect the valuation of the final product. The applicant's rate of Rs. 2.50 per kg for the output supply of sand considers the 'Nil' value of the input sand. Order: 1. The activity of the applicant is a Supply of Goods. 2. The 'Nil' value of the used waste sand will have an impact on the valuation, confirming the applicant's understanding.
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