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TMI Blog2020 (6) TMI 704X X X X Extracts X X X X X X X X Extracts X X X X ..... nerated on job work basis, it is bound to happen that any inputs sent to the premises for the generation of electricity would not be sent back in the same original form. Instead, the same is destined to be consumed for the generation of electricity, which was actually the facts of the cited case law discussed herein above, wherein the Respondent i.e. lndorama Textiles Ltd. was vying to claim the input tax credit in respect of the furnace oil, which was getting consumed in the premises of their job worker. The Bombay High Court, in this case, decided in the favor of the Respondent, holding that the Respondent was justified in claiming input credit in respect of the furnace oil, being used at the job worker s premises for the generation of electricity, which was the intermediate goods, being received by the Respondent, in that case the principal - By applying the above case law in the instant case, it is opined that coal, despite being consumed in the process of the generation of electricity, thereby becoming irretrievable, will not preclude the proposed arrangement from being the job work transaction, as understood by the Appellant. The principal will not be in position to indepe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stipulated in the definition of the Job work provided under section 2(68) of the CGST Act, 2017, which envisages the presence of the two persons only, viz. the Principal and the job worker, in any job work transaction, is not satisfied due to the inevitable presence of the 3 Party i.e. MSEDCL, which happens to be the power regulator in the state of Maharashtra having the authority to formulate the norms and guidelines regarding the electricity distribution within the state, which are required to be complied with by the entities seeking to use the distribution facility of MSEDCL. (ii) Further, the condition prescribed for the job work procedure as envisaged under section 143 (1)(a) of the CGST Act, 2017, which provides that a registered person is required to bring back the inputs from the premises of the Job worker after completion of job work or otherwise, is also not fulfilled by the Appellant owing to the following two reasons: (a) the inputs proposed to be sent by the Principal i.e. JSL to the Appellant i.e. JEL would get consumed to generate electricity, thus, in that case, the Principal i.e. JSL would not be in position to bring back the inputs that it proposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed arrangement/transaction will not have the essence or characteristics of the Job worker, as per the rulings of the aforesaid Supreme Court Judgment, which contemplates that only the minor additions of the inputs can be done by the Job worker on the inputs supplied by the principal in any job work activity. Aggrieved by the above AAAR order, the Appellant had filed the writ petition before the Hon ble Bombay High Court on the grounds that the Appellate Authority had exceeded its jurisdiction by introducing or relying upon the new grounds , which were never raised by the Revenue before the Advance Ruling Authority, and that too without putting the Appellant to notice in respect thereof, while deciding the subject appeal , thereby, resulting in the violation of the principles of natural justice. The Hon ble Bombay High Court, taking cognizance of the aforesaid writ petition and grounds therein, filed by the Appellant, passed an order dated 07.06.2019, wherein the Hon ble Court has directed to reconsider the appeal under question by taking into account the additional submissions including the additional documentary evidence, proposed to be filed by the Appellant with regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agreement, the title in the inputs vest with JSL along with the power generated with the use of such inputs. In addition to power, fly ash and other resultant products generated at power plant using the inputs will also vest with JSL and the Appellant will have no ownership in such resultant products. The Appellant had approached the Advance Ruling Authority (AAR) for seeking an advance ruling under Section 95 (a) of the CGST Act, for determination of the applicability of GST on the following issues: I. Supply of coal or any other inputs on a job work basis by JSL to JEL II. Supply of power by JEL to JSL III. Job work charges payable to JEL by JSL ORDER PASSED BY AAR E. The Order dated 05.03.2018 = 2018 (5) TMI 763 - AUTHORITY FOR ADVANCE RULINGS MAHARASHTRA has been passed by AAR holding that the proposed transaction amounts to manufacture and therefore it would not qualify as job work under GST. F. The Impugned Order has not responded on the GST implication in respect of the coal and other inputs supplied by the JSL to Appellant on the basis that the transaction pertains to GST liability of JSL and not of Appellant. G. Being aggrie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er for production of intermediate goods. There is no challenge to understanding/agreement between Respondent No. 1 and M/s. IRSL. We do not find anything perverse in findings recorded in paragraph 6 of the order No. A/67/2007/EB-C-II, dated 31-1-2007 in Appeal No. E/3701/05-Mum. These reasons hold good even for second matter. 3. Further the Supreme Court dismissed the appeal petition filed by the Commissioner of Central Excise Nagpur against the order of the Hon ble Bombay High Court in the matter of Indorama Textiles Ltd (supra) - Commissioner of Central Excise, Nagpur vs Indorama Textiles Ltd. 2010 (260) E.L.T. A83(SC) = 2010 (7) TMI 981 - SC ORDER Additional Submissions made by the Appellant with regard to the new grounds taken up in the Appellate Order dated 02.07.2018, pursuant to the Hon ble Bombay High Court dated 07.06.2019 COAL IS AN INPUT FOR THE PRINCIPAL 4. The Appellant submits that the Appellate Authority Order has entirely failed to appreciate the essence of the transactions in light of the provisions of law and erroneously concluded that coal and other inputs supplied to the Appellant do not constitute as inputs for the manufacture o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any similar activity as well as activities which are incidental or ancillary to the said activities. Thus, the activity of generation of power is clearly within the ambit of a business as per the Memorandum and accordingly coal would qualify as an input. 10. Additionally, the Appellant re-iterates that its power plant is a captive power plant of JSL. Thus, generation of power is an integral part of the business activities of JSL and such power generated at the captive plant is used for manufacture of steel. The coal required for generation of power thus qualifies as input. 11. Basis the above, it is humbly submitted that the ground adopted by the Ld. Appellate Authority on coal not being an input for JSL (i.e. the Principal) is not tenable under the applicable GST legislations for reasons cited above. 12. In addition to the above submissions, the Appellant seeks reference to Circular No. 79/53/2018-GST dated 31.12.2018 issued by the Central Board of Indirect Tax and Customs. Relevant portions of the paragraph 9 (b) of the aforesaid circular are reproduced as under: Issue: A registered person uses coal for the captive generation of electricity which is further used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reference is sought to the order issued by Commissioner of Central Excise and Customs - Belgum (010- No. BEL/ EXCUS/000/COM/B.HR/ 005/13-14/CX dated 30.06.2014), which allowed JSL CENVAT Credit of the Counter veiling Duty paid on the import of steam coal. The relevant portion of paragraph 25 is quoted as follows: As the arguments and the contentions of the assessee found to be more appropriate and as such, I found no merits in the stand taken by the department to deny Cenvat credit of 1% / 2% CVD paid by the assessee on the imported steam coal. Hence, I incline to allow the Cenvat credit of ₹ 5,14,84,164/- and ₹ 9,56,57,260/- availed during April 2012 to February 2013 and March 2013 to September 2013 respectively. 16. To the above, the Appellant seeks to point out that in the above referred matter, the Ld. Commissioner of Central Excise and Customs - Belgaum, took cognizance of the fact that steam coal was an input for JSL and accordingly allowed credit of the same. Further, no appeal has been filed by the Department against the aforesaid order thus it is clear that coal is always considered as an input for steel. To this, it is humbly submitted that if coal is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that coal has been construed as an eligible input used for the manufacture of power which in turn is used for manufacturing/supply of taxable product and accordingly credit for the same has been allowed. These facts are akin to the Appellant s matter, who generates power from a captive power plant of the Principal (i.e. JSL). Therefore, given the facts of the present scenario, coal should be continued to be treated as an input in the hands of JSL. INPUTS CAN BE BROUGHT BACK BY THE PRINCIPAL WITH THE HELP OF A THIRD PARTY 19. The Appellant reiterates that transaction undertaken by it fulfills all the conditions mentioned under Section 143 of the CGST Act to qualify as a Job Work transaction. The Appellant submits that inputs provided by JSL, are proposed to be sent back to the Principal in the form of power within the stipulated time and in accordance with the aforesaid section. Further, the Appellant humbly submits that the said section does not bar the involvement of a third party for transporting the goods from the premises of the Job Worker to the Principal. The Ld. Appellate Authority has erred in its order under paragraph 48 to hold that the job work arrangement r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amining the meaning of the input under Cenvat Credit Rules, 2004 and admissibility of credit of tax on such input held that there should not be inadmissibility of input credit on input or input services used by wind mills to generate energy which is made available through power board under barter system. 21. In the judgment of Endurance Technologies (supra), the High Court has concluded that input tax credit of the inputs used in generation of power under barter transaction, where the power is supplied back against the inputs, would be available. Basis the above-mentioned judgments, which formed part of the submissions to the Advance Ruling Authority, it can be construed that transaction of processing the inputs supplied by JSL and supplying back the power generated to JSL would fulfill the condition of bringing back the inputs. The involvement or absence of a third- party regulator for transmitting the power to the Principal would not have any significance while determining the fulfilment of the aforesaid conditions. 22. In the present case, plants of JSL and JEL are situated at different geographical locations and power is brought back using the power grid of Maharashtra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submits that coal and other inputs constitutes a major cost i.e. more than 95% of the total cost of materials that are required for generation of power. These are supplied by the Principal (i.e. JSL). The cost towards water and air does not exceed 0.5% of the cost of inputs, which is made available by the Job Worker (i.e. the Appellant). These charges, along with other expenses that are required for generation of power from coal are in any case included under the ambit of Job Work charges, chargeable by the Appellant. 25. Seeing a reference to the above, the Appellant refers to the Appellate Authority s order, where, at paragraph 50, the decision of Prestige Engineering (India) Limited vs Collector of C. Excise, Meerut [1994 (73) E.LT. 497 (S.C)] = 1994 (9) TMI 66 - SUPREME COURT , has been referred. Further, the Ld. Appellate Authority has cited reference of a principle enumerated therein, which is reproduced as under: 17 The Concise Oxford Dictionary assigns several meanings to the expression job but the relevant meaning having regard to the present context is a piece of work especially one done for hire or profit . The expression job work is assigned the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... manufactured. 29. Basis the above, the Appellant humbly submits that the conclusion drawn by the Appellate on the grounds that air and water constitute a major input which is provided by the Job Worker is grossly erroneous and is liable to be set aside. SUBMISSION OF OTHER DOCUMENTARY EVIDENCES/ DETAILS 30. The Appellant humbly submits that it was alleged by the Appellate Authority that certain documentary evidences/ details were not submitted to justify the Job Work activity. To the same, following are the Appellant s responses: 31. Agreement or Proposed Agreement to understand the quantity and value of inputs being supplied by the Principal and the amount and quantity of inputs/ materials being used by the job worker. To the above, the Appellant submits that the transaction is at a conceptualization stage and there is no proposed agreement. However, illustrative clauses of the proposed agreement between JEL and JSL were already provided in the Advance Ruling Application filed before the Advance Ruling Authority. 32. Further, the quantum of inputs to be sent to the Job Worker would be dependent on the power supply required by the Principal, which in turn is depe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, there are a plethora of judgements wherein credit of inputs has been allowed, even though the same are not mentioned under the SION norms of the applicable products. These judgments are mentioned herein under: Commissioner of Central Excise, Indore vs Grasim Industries Limited [2002 (147) E.L.T. 190 (Tri.-Del)) = 2002 (2) TMI 998 - CEGAT, NEW DELHI ; Jaypee Rawa Cement vs Commissioner of Central Excise, MP [2001 (133) E.L.T. 3 (S.C.)) = 2001 (8) TMI 1332 - SUPREME COURT ; Essar Steel Limited vs Commissioner of Central Excise, Surat-I [2001 (129) E.L.T. 213 (Tri.-Mum.)] = 2000 (12) TMI 382 - CEGAT, MUMBAI ; Vikram Cement vs Commissioner of Central Excise, Indore [2006 (194) E.L.T. 3 (S.C.)] = 2006 (1) TMI 130 - SUPREME COURT . 38. In view of the various submissions made by the Appellant and the additional submissions made herein, it is submitted that- 39. (i) Coal constitutes an input for the Principal (i.e. JSL) in the process of generation of power; (ii) Inputs sent to a Job Worker can be brought back with the involvement of a third party, who effectively plays the role akin to a transporter; (iii) Air and water, provided by the Job Worker constitute a mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ces different types of Coal; (a) Coking coal falling under Customs Tariff Heading 27011910 for Amba River Coke Ltd., Dolvi Village, P.O. Wadhkal. Tai-Pen, Dist. - Raigad, Maharashtra 402107, (b) Coking coal falling under Customs Tariff Heading 27011910 for their unit M/s. Amba River Coke located at Geetapuram, Dolvi Pen, Raigad 402107. (c) Coking coal falling under Customs Tariff Heading 27011910 for JSW Steel Ltd., Geetapuram Dolvi to Pen Dist.-Raigad, Maharashtra, (d) PCI Coal falling under Customs Tariff Heading 27011910 for manufacture of Steel JSW Steel Limited located at Geetapuram, Dolvi Pen, Raigad 402107, (e) Steam Coal falling under Customs Tariff Heading 27011920 for production of electricity by JSW Energy Limited Kunbiwadi, Nandiwade, Post Jaigad, Ratnagiri 415614, 43. From the above it can be observed that specifications for coal are set out by JSL for Coking Coal, PC, Coal and Steam coal and from the records it has been observed that steam coal has always been assigned to JSW Energy Ltd. and not Coking or PC Coal. M/s. JSL have not clarified whether they are having in-house coal fired power plant for production of electricity for captive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. JSL, but it is input for M/s. JEL which generates the electricity using the said Steam coal as fuel for running the turbine, which in turn generates the electricity. Steam Coal is not the input for M/s. JSL therefore; the goods sent to the job worker should be the Inputs of the Principal. Here, M/s. JSL are acting as the Principal, so the Inputs should belong to them. However, in the present case, the goods being proposed to be sent to M/s JEL, i.e. coal, are the Inputs for M/s JEL itself for their final product i.e. Electricity and not the Inputs for the Principal, i.e. M/s JSL as they are manufacturer of Steel and not power. Hence Steam Coal does not constitute as an input for the Principal (i.e. JSL) in the process of generation of power. 46. SECTION 2(68) defines job work as; job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression lob worker shall be construed accordingly; SECTION 143 defines Job work procedure as; (1) A registered person (hereafter in this section referred to as the principal ) may under intimation and subject to such conditions as may be prescribed, send an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would supply power to the extent of contracted capacity to MSEDCL, where the seller (M/s JEL) shall not itself use any of the electricity generated by the unit, to the extent of its contracted capacity. M/s JSL is engaged in manufacture of steel and M/s JEL is engaged in production of electricity which it appears would not solely be for its own consumption, the electricity generated at M/s JEL is said to be transmitted through electrical grid of MSEDCL to the consuming Steel manufacturing unit of M/s JSL, however as there is no agreement between M/s JEL and MSEDCL available how would M/s JSL ensure that electricity transmitted would be sent to them and not be utilized somewhere else by MSEDCL. 50. As per the provision of Section 143(1)(a) of the CGST Act, 2017, there should be involvement of only two persons i.e. one principal and another job worker for any transaction to be falling under the ambit of job work, which is not the case here, as there is involvement of third entity which is in nature of the regulatory agency which would govern the supply of the final commodity, in this case, electricity, subject to certain terms and conditions. Thus, the principal does not have co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th and breadth of India. It is not into the business of buying commodities and fuels in Industrial, consumer and agricultural segments so the similarity ends at distribution, therefore the comparison between the rail authorities charging fee for transportation of inputs, were similar to the amount paid to the Grid is weak. The Transporter or Railways cannot dictate terms, divert or send the consignment/ to somebody else which MSEDCL can. In the instant case, the manufacturer/principal cannot bring back their inputs, which is in the form of electricity, without getting due and prior approval from the competent authority. Hence Inputs proposed to be sent to a Job Worker cannot be brought back and the transaction undertaken would not fulfil all the conditions mentioned under Section 143 of the CGST Act to qualify as a Job Work transaction. 52. JEL have relied on the decision of the Hon ble High Court of Bombay in the matter of CCE, Aurangabad vs. Endurance Technologies Pvt. Ltd. = 2015 (6) TMI 82 - BOMBAY HIGH COURT And the Tribunal at Chennai in the matter of DCW Ltd vs. Commissioner of C.Ex, Triunelveli [2016 (332) ELT 142 (Tri-Chennai) and in the matter of Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducts, as the coal proposed to be sent by JSL to the Appellant will be supplied back in the form of electricity, which in turn are used by JSL to manufacture their final products i.e. steel. They, inter alia, have place their reliance on the definition of inputs as defined under Section 2 (59) of the CGST Act, which, they averred, is wide enough to cover the steam coal, proposed to be sent by JSL to JEL for conversion into electricity on the job work basis. The said definition of input is reproduced as follows: input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business ; (Emphasis supplied) For the said purpose, reliance was also placed on the term business which is defined under Section 2(17) of the CGST Act. For the said purpose: Business includes - (a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit, (b) Any activity or transaction in connection with or incidental or ancillary to sub-clause (a) .. .. 56. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for generation of electricity is not available? 59. Clarification : There is no distinction between intermediate goods or services and final goods or services under GST. Inputs have been clearly defined to include any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business. Since coal is an input used in the production of aluminum, albeit indirectly through the captive generation of electricity, which is directly connected with the business of the registered person, input tax credit in relation to the same cannot be denied. (Emphasis Supplied) 60. The Appellant, relying on the abovementioned circular issued by the CBIC, has drawn an analogy to the effect that that the transaction in question is squarely covered by the aforesaid example adopted in the above cited circular. They further elaborated that, the example considered in the aforesaid circular aluminum is similar to steel and has a similar manufacturing process. Further, Inputs (such as coal) are used for the manufacture of power, which in turn is used for the manufacture of steel. Therefore, the coal would qualify as eligible inputs for the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11) TMI 76 - SUPREME COURT (c) Emcee Crown Corks (P) Ltd. V/s. Commissioner of C.Ex. Bangalore [2002 (149) E.L.T. 639 (Tri.- Bang.) = 2002 (3) TMI 168 - CEGAT, BANGALORE (d) Bharat Commerce and Industries Ltd. V/s. Collector [1997 (94) E.L.T. A136] = 1997 (2) TMI 580 - SC ORDER 65. They have further contended that electricity can be generated on a job work basis. They had also cited the following judicial pronouncement in order to support this contention: Commissioner of Central Excise, Nagpur vs Indorama Textiles Ltd 2010 (260) ELT 382 (Born HC) = 2009 (10) TMI 571 - BOMBAY HIGH COURT Haldia Petrochemicals Ltd vs CCE, Haldia 2006 (197) ELT 97 (Tri.- Delhi) = 2005 (1) TMI 306 - CESTAT, NEW DELHI Sanghi Industries Limited vs CCE, Rajkot 2006 (206) ELT 575 (Tri.- Delhi) = 2006 (4) TMI 422 - CESTAT, NEW DELHI Sanghi Industries Limited vs CCE, Rajkot 2014 (302) ELT 564 (Tri.- Ahmd.) = 2014 (2) TMI 278 - CESTAT AHMEDABAD On perusal of the above cited Bombay High Court Judgment in the case of Commissioner of Central Excise, Nagpur vs Indorama Textiles Ltd, which was subsequently upheld by the Supreme Court vide its Judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... UPREME COURT , wherein it was observed by the Apex Court that for any activity or transaction to be construed as the job work, the job worker is allowed to add only minor inputs or raw materials to the inputs supplied the principal. However, in the subject arrangement, the proposed job worker i.e. JEL/Appellant would be adding considerable and sizeable amount of inputs in terms of volume and cost in the form of air and water to the input supplied by the proposed principal i.e. JSL in this case, and the activities carried out by the Appellant would not qualify for the Job work in terms of the above observation of the Apex Court. In this regard, the Appellant has furnished the certificate of the Cost Accountant pertaining to F.Y. 2017-18, wherein it has been testified that coal and other inputs constitutes a major cost i.e. more than 95% of the total cost of materials that are required for generation of power, whereas the cost towards water and air does not exceed 0.5% of the cost of inputs. Referring to this certificate issued by the Cost Accountant, the Appellant have further contended that coal constitutes the major cost for manufacture of power, whereas air and water constit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsported between the premises of the principal and that of job worker by availing the facility of railway. In this case, the railways will be acting in the capacity of the regulatory authority for the purpose of the transportation of the said goods, as they will be allocating the rakes and carriages for the subject goods, similar to the power regulator in the case of the transmission of electricity from one place to another. They further contended that transportation of the goods between the principal and the job worker by the railways/roadways has never been disputed in the context of the fulfillment of the condition prescribed for the job work transaction/activity. They also cited the decision of the Hon ble High Court of Bombay in the matter of CCE, Aurangabad vs. Endurance Technologies Pvt. Ltd. [2015-TIOL-1371-HC-MUM-ST] = 2015 (6) TMI 82 - BOMBAY HIGH COURT where credit on inputs and input services used by wind mills to generate energy which is made available to the manufacturer through power board under the barter system, has been allowed. 70. On perusal of the above submissions including the illustration and the case law cited herein above, it is opined that pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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