2022 (1) TMI 151 - AAAR - GST

Nature of activity - Job work - manufacturing or services - body building activity on the chassis provided by the principal - applicability of clarification of CBIC vide para no. 12.3 of Circular No. 52/26/2018-GST date 09.08.2018 clarifying 18% rate of GST in respect of building of body of buses - HELD THAT - The job worker can use certain inputs required for fabrication work and the same will not amount to manufacture. Transfer of ownership to the appellant - HELD THAT - As per Appellant, they are procuring some inputs like steel sheets, windows, glasses, wiring harness etc on payment of duty, which is further claimed as Input Tax Credit whereas the chassis of tippers, tankers and trucks etc are received by them, free of cost, under the delivery challans. Accordingly, the chassis delivered to the Appellant remains in their temporarily possession only for certain time to carry out the process of job work as per direction of the principal. The Appellant has received the chassis only as job worker and on free cost basis under the delivery Challan - the ownership of the chassis always remains with the Principal i.e. M/s TATA Motors. As per Notification No. 11/2017- Central Tax (Rate) dated 28.06.2017, as amended, it has been clarified that the Tax rate for (ic) Services by way of job work in relation to bus body building would be 18% - Circular No. 52/26/2018-GST dated 09.08.2018 is squarely applicable in the case of Appellant. Thus, the body building and mounting of body on the chassis of different models of Tippers, Tankers, Trucks and Trailers, on the chassis to be supplied by the Principal, on delivery challans, by collecting job work charges for such fabrication work is taxable @18%, in accordance with Circular No. 52/26/2018-GST dated 09.08.2018, subject to fulfillment of all the conditions prescribed in the Section 141 and 143 of the CGST Act, 2017 read with relevant Rules/Notifications.

Summary

Issues:
1. Interpretation of whether body building activity on the chassis provided by the principal amounts to manufacturing services attracting 18% GST.
2. Clarification on the applicability of the CBIC circular regarding the GST rate in the case of the applicant.

Analysis:
1. The appeal was filed against the Advance Ruling Order that concluded the body building activity on the chassis did not amount to manufacturing services attracting 18% GST. The appellant argued that the process constituted job work as defined in Section 2(68) of the CGST Act, 2017, and ownership of the chassis remained with the principal. They referenced Circular No. 38/12/2018 to support their claim that job workers can use inputs for fabrication without it being considered as manufacture. The appellant's submission emphasized the temporary possession of the chassis for job work, maintaining the principal's ownership.

2. The discussion highlighted the process of body building involving fabrication, assembly, mounting, and finishing. The definition of "manufacture" under Section 2(72) was contrasted with job work under Section 2(68) to distinguish the nature of the activity. The judgment referenced Circular No. 52/26/2018-GST and Notification No. 11/2017 to address the applicable tax rates for such services. It was concluded that the body building and mounting activity on chassis supplied by the principal, subject to certain conditions, should be taxed at 18% as per the circular, not as manufacturing.

Conclusion:
The appellate authority ruled in favor of the appellant, determining that the body building activity on chassis for various vehicles constitutes taxable services at 18% GST rate. The judgment clarified the distinction between manufacturing and job work, emphasizing the temporary possession of chassis for fabrication purposes. The decision aligned with Circular No. 52/26/2018-GST and relevant notifications, providing a comprehensive analysis of the issues raised in the appeal.