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TMI Blog2020 (10) TMI 468X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - - - Dated:- 26-8-2020 - MS. P. VINITHA SEKHAR, AND MR. A.A. CHAHURE, MEMBER PROCEEDINGS (Under Section 98 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017) The present application has been filed under Section 97 of the Central Goods and Services Tax Act, 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as the CGST Act and MGST Act respectively] by Kolhapur Foundry and Engineering Cluster, the applicant, seeking an advance ruling in respect of the following questions. 1. Whether the activity of Applicant is Supply of Goods or Supply of Job Work Services? 2. The used waste sand which is of the value Nil (Refer separate Valuation Certificate by Engineer) will have any impact on valuation? At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under: Section2 (68): job work means any treatment or process undertaken by a person on goods belonging to another registered person and the expression job worker shall be construed accordingly. 2.6.1 From a combined reading of, the definition of job work as aforesaid and the procedure of job work as prescribed u/s 143 of the CGST Act and Rule 45 of GST Rules, it is the principal who will send inputs to the job work 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 sends goods to the job worker, is a principal and the person who undertakes treatment/ processing is a job worker. 2.6.2 Applicant receives used sand, from various foundry units under the cover of Rule 55 Challan which is processed to get fresh sand which is unique and available in various categories (based on its size) after normal loss of quantity at about 20%. It is not possible to identify whether output sand is recovered from the used sand of any particular foundry. 2.6.3 The product i.e. Sand is then handed over to the recipient on completion of the production. 2.6.4 In order to appr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (India) vs Collc. of Central Excise, Merut (1994 (73) E.L.T.497 (SC)] = 1994 (9) TMI 66 - SUPREME COURT , the Hon ble Supreme Court has considered various examples of job work and observed that the real spirit of job work 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 subject case as a matter of fact the value of final product only consists of Plant Machinery, Operation Cost and Other overheads since the value of inputs received from customer i.e. used waste sand, is having Nil valuation in the costing of final product. The value of the material used, skills used, set up cost of plant and labor applied by the applicant is the value of final product. The value of input supplied by the customer i.e. Sand, is nowhere considered at the time of final product valuation. 2.9 Further, there are differences in the quantities of waste sand dumped by the foundry units and quantity of fresh sand picked up by them. To qualify the activity as job work, out of the quantities dumped by the foundries of waste sand after ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration not wholly in money, the value of the supply shall, (a) be the open market value of such supply; (b) if the open market value is not available under clause (a), be the sum total of consideration in money and any such further amount in money as is equivalent to the consideration not in money, if such amount is known at the time of supply; (c) if the value of supply is not determinable under clause (a) or clause (b), be the value of supply of goods or services or both of like kind and quality; (d) if the value is not determinable under clause (a) or clause (b) or clause (c), be the sum total of consideration in money and such further amount in money that is equivalent to consideration not in money as determined by the application of rule 30 or rule 31 in that order. 2.12.2 In normal scenario as explained above, the value of used waste Sand is not considered anywhere in the valuation of final product fresh sand. The reason being the value as engineer is Nil (Annexure: Used Sand Valuation Certificate). Waste sand ded and has no value attached to it. So clause (a) becomes irrelevant. 2.12.3 Similarly based on above grounds clauses (b) (c) also be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Background: Sand Reclamation Plant Major manufacturing industries in Kolhapur are foundries Machine shops; producing ferrous non-ferrous components for well-known OEMs throughout the country. Considering the same, Government of India, Ministry of Commerce Industry, Department of Industrial Policy Promotion approved the IIUS project, mentioned above. 2.13.1 Constitution of project: Applicant Company, formed by 5 industrial associations from Kolhapur district, is registered under Section 25 of the Companies Act 1956, on the basis of NO PROFIT NO LOSS. Availability of required sand, which is the basic production factor for foundry industry is crucial for sustenance of foundry industry. The subject reclamation plant will serve all foundry and sand related industry in Kolhapur district. The said project will be a common facility coupled with social reason to cater foundry industry as well as for the benefit of common people in this region by avoiding pollution. 2.13.2 Funding of Project: The funding is already mentioned in 2.10 above. 2.13.3 Purpose - Best from Waste: The major component of cluster is Sand Reclamation Plant, established for reclamat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to provide any waste or disposable sand for treatment but may be interested to use treated sand. In some cases foundry units and other sand related business units fail to provide waste or disposable sand for treatment then the plant has to procure the Sand wherever it is available from waste sand storages. 2.14 A detail of process is as given below. A) Waste sand storage: Sand reclamation plant receives waste from foundry and stores it in, Waste Core sand storage and waste raw black sand storage. B) Process flow: With the reference of schematic diagram following is the description and working of plant. 1. 4 M.T Hopper There are two hoppers each of 4 MT, used to feed waste material to plant. One hopper is used for crushed core sand and another one is used for waste raw black sand. Flow of sand is maintained with mechanical sliding dampers and VFD driven trolley under the hopper. This also helps to attain proper mixing of waste crushed core sand and waste raw black sand. Screens are given to hoppers for separation of big size of wastages from material e.g. plastic, glass and paper waste. 2. Belt Conveyor No 1 Is used to transfer mixed w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f energy-saving mobile furnace which is specially designed for foundry sand reclamation process. The main target of foundry sand reclamation process is to get rid of combustible substances such as clay. In terms of thermal energy consumption, most of heat is utilized for heating of sand. The outer coatings of waste sand particles are burned in the furnace and loosen too. Loss on ignition value and acid demand value get controlled here. Root blower is used to fluidize the sand bed inside the furnace. After burning of sand, fluidization effect separate out unburned clay from sand particles. It can fully recycle and utilize substantial accumulation of heat left in the heated sand, using it as the heat source for the newly input sand. Moreover, it also improves the quality of the reclaimed sand through all kinds of optimization. Compared with the traditional furnaces, this furnace not only reduce half of its fuel consumption, demonstrating obvious energy-saving effects, but also maintain the sand s high quality and its own reliable and excellent operation, etc. After furnace we get thermally reclaimed sand. 16. Vibrating Conveyor This machine is working on the basis of forw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nciple used from MMR 1 to 12 machines. As per requirement machines can be on or kept off. 24. Fluid bed de-duster This machine is used for de-dusting i.e. dust removing process. During mechanical reclamation sharp corners of sand gets break and came to circular shape which is good result, but it s also generate dust and it needs to be removed from sand. Principle of operation is same as fluid bed cooler except only cooling system not used. Forced air creates fluidization of sand and air flow conveys dust from sand to dust collector point. It also removes clay particles which reduces sand total clay percentage. 25. Bucket elevator No 7 It is used to transfer reclaimed sand from Fluid bed de-duster to Surge arrestor tank 26. Surge Arrestor Tank No 3 This tank absorb surge of sand flow and maintain constant flow towards sieve shaker machines with 2 no s of outlets. 27. Sieve shaker machine Sieve Shaker is composed of screen mesh, frame, base, eccentric shaft, motor and other parts. The motor rotates the eccentric shaft through belt and belt wheels. The frame rotates cyclonically a circle around the fixed point driven by the eccentric s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our opinion this above entry sounds unfit for the type of our finished goods, also the manufacturing procedure is not based on chemical processing but is mainly thermal (Heat Treatment) based. So the output which is coming out of the said manufacturing process should be treated as Silica Send, which is completely different product than the input i.e. waste sand which has zero valuation 03. CONTENTION - AS PER THE JURISDICTIONAL OFFICER: The submissions made by the jurisdictional officer is as under:- 3.1 As regards the first question raised by the applicant, subject activity may constitute Job Work Services only if reclaimed sand is returned back to the owner, by merely charging the cost on process activities. However, in the subject case, value of inward supply is Zero so the material ownership is not in existence. Further, the processed sand is entirely different commodity, processed, by taking in waste sands obtained from various foundries. But, consequently cannot be correlated to the original owners. In addition to these facts, the invoice obtained from the applicant, bearing no. 19-20/SH/DEC/37 dated 7-Dec-2019 shows the rate of sand is at ₹ 2.50 per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admission of the application. Jurisdictional Officer Shri Kirankumar Salokhe, Assistant Commissioner of State Tax, Kolhapur Division also appeared. The application was admitted and called for final hearing on 11.02.2020. Shri Girish Kulkarni, C.A. Authorized Representative, appeared made oral and written submissions. Jurisdictional Officer Shri Kirankumar Salokhe, Assistant Commissioner of State Tax, Kolhapur Division appeared and made submissions. We heard both the sides. 05. DISCUSSIONS AND FINDINGS: 5.1 We have gone through the facts of the case, documents on record and submissions made by both, the applicant as well as the departmental officer. 5.2 The applicant receives waste sand which is processed with heat treatment (Thermal Plant) various other set of small procedures and is reclaimed and made re-usable. 5.3 The first question raised by the applicant is whether the activity of Applicant is Supply of Goods or Supply of Job Work Services. To answer this question, we need to examine whether the subject activity undertaken by the applicant is covered under supply of goods or Job work, for which we will examine the definition of Goods , Manufacture ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the quality of the sand is good for foundry use and is ready for foundry owners who are interested in buying the said fresh product. 5.3.8 It us found that, the applicant by applying different processes and treatments on the waste sand and received and using its owns consumables to bring into existence, a fresh new finished usable product, which is a distinct commodity and has commercial value. Therefore, in our view, the activity undertaken by the applicant satisfier the conditions of term manufacture u/s 2(72) of CGST Act, Hence such activity 3V10unts to manufacture . 5.3.9 We find, from the submission that, 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature and of considerable value, then in such a case the work done cannot be characterized as a job work. 5.3.13 From the observations made by the court we find that additional application of minor items is permissible in job work. In the subject case, the applicant has categorically stated that their activity is an activity of manufacture of a new commodity by using its own raw material and skill and labour as well as the input material supplied, value of which is NIL. 5.3.14 Finally, the jurisdictional officer has submitted that, invoice bearing No. 19-20/SH/DEC/37 dated 7-Dec-2019, obtained from the applicant, shows the rate of sand is at ₹ 2.50 per kg., while the market rate of fresh sand is at ₹ 3.00 per kg and hence when compared, it appears that both prices are nearly one and the same. Hence the jurisdictional officer has opined that, subject activity is not merely job work, but supply of goods. 5.3.14 We find that, 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 inpu ..... 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