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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 ..... sions. 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 this Advance Ruling, the expression 'GST Act' would mean CGST Act and MGST Act. 2. FACTS AND CONTENTION - AS PER THE APPLICANT 2.1 The submissions made by the Ms. Kolhapur Foundry & Engineering Cluster, the applicant is as under:- 2.2 Applicant, is involved in promotion of commercial activities relating to Foundry Industry & preservation of environment through its Sand Reclamation Plants. 2.3 Used/ waste sand of Foundry Industry is neither capable of being reused nor being capable of being dumped anywhere in open, due to environmental reasons like, contamination of fertile oil/ water pollution. Applicant processes such waste sand vide heat treatment & various other set of small procedures and sand is thus reclaimed and made re-usable. 2.4 Following are the main steps in producing the reclaimed sand: (i) Waste Sand is received at applicant's KFEC plants from various Foundries. As there is no commercial use of this used/waste sand, the value ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tivity undertaken by the applicant is job work GST Flyers have been referred to, as under:- It is mentioned that Job work sector constitutes a significant industry in Indian economy. It includes outsourced activities that may or may not culminate into manufacture. The term Job-work itself explains the meaning. It is processing of goods supplied by the principal. The concept of job work already exists in Central Excise, wherein a principal manufacturer can send inputs or semi-finished goods to a job worker for further processing. Many facilities, procedural concessions have been given to the job workers as well as the principal supplier who sends goods for job work. The whole idea is to make principal responsible for meeting compliances on behalf of the job worker on the goods processed by him (job worker), considering the fact that typically the job- workers are small persons who are unable to comply with the discrete provisions of the law. The GST Act makes special provisions with regard to removal of goods for job-work and receiving back the goods after processing from the job worker without payment of GST. The benefit of these provisions shall be available both to the principa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... antities should be picked up by the foundry units. But the arrangement in the case of applicant is operating more or less on convenience basis, meaning, as the waste sand is to be dumped in the specified areas only not anywhere else, the foundries may dump whatever sand is available with them at any given point in time with applicant, whereas only those quantities which are required by them at any given point in time only will be picked up which may be more or less than actually dumped waste sand after deducting normal loss. So it gives this transaction the color of supply of goods. Hence, the said transaction based on its nature, characteristics and unique attribute does not satisfy the criteria to qualify it as Job Work and should be construed as Supply of Goods. If this is to be treated as Supply of Goods in that case we also seek the clarity regarding one of aspect pertaining to the valuation of the same. 2.10 Government of India, Ministry of Commerce & Industry, Department of Industrial Policy & Promotion approved a project for Kolhapur District viz. Kolhapur Foundry & Engineering Cluster for Up-gradation of infrastructural facilities at industrial areas, sanctioned under Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hundred and ten percent of the cost of production or manufacture or the cost of acquisition of such goods or the cost of provision of such services. Even this rule does not become applicable since waste said is not usually produced/ manufactured but it is just a by-product of Foundry operations, hence there is no Cost of Production attached directly to his waste used sand. 2.12.5 Also taking into consideration point no point no 1, 2 & 3 above, as per Rule 28 of CGST Rules, The value of the supply of goods or services or both between distinct persons as specified in sub-section (4) and (5) of section 25 or where the supplier and recipient are related, other than where the supply is made through an agent, shall (a) be the open market value of such supply; (b) if the open market value is not available, be the value of supply of goods or services of like kind and quality, (c) if the value is not determinable under clause (a) or (b), be the value as determined by the application of rule 30 or rule 31, in that order: Provided that where the goods are intended for further supply as such by the recipient, the value shall, at the option of the supplier, be an amount equivalent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rated in foundry molding process. Core is a solid block of sand used in molding process. Such core becomes obsolete once it is used in moulding process. This core sand also is to be used for reclamation. This disposable black sand and core sand generation process is continuous in foundry process and it is necessary to dispose this generated sand. This disposable sand do not have any commercial value. 2.13.5 Environment impact: Send, a natural resource for foundry unit for casting production, is becoming scarce. Consideration the present and future use of sand by foundries there may be chances of facing problems regarding availability of fresh sand as well as disposition of used waste sand, Waste sand cannot be dumped anywhere in open as it may lead to water pollution and contamination of farming land. Sand reclamation is the answer for such problems. Further, waste generated during reclamation process will be used for bricks making. Thus this plant will ensure 100% conversion of waste to reusable material. 2.13.6 Conservation of Natural Resource: The reclamation plant will enable foundries to reuse reclaimed sand in their process which will result in reduction in the demand for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Removing moisture from waste material will help to reduce fuel consumption. For drying purpose hot air blower (ID fan) extract fumes and hot air from furnace top to dryer. This is very energy efficient process in which excess energy in the form of hot air and fumes reused. 6. Bucket Elevator No 2 It is used to transfer material from dryer to crusher. 7. Crusher The crusher ensures that the sand obtained is of homogeneous size and smooth surface. The binder on the sand surface is also removed by crushing. mesh of crusher separates metal waste, paper waste, plastic waste and wooden waste. 8. Reject belt conveyor It's a part of crusher which removes foreign waste and unwanted material from processed crushed sand. In specified frequency reject belt conveyor goes inside of the crusher, collects waste and come to its discharge position. 9. Belt Conveyor No 2 It is used to convey crushed waste sand from crusher to bucket elevator No. 3. 10. Bucket Elevator No 3 It is used to transfer material from belt conveyor no 2 to waste sand storage hopper. 11. Waste sand storage hopper Waste sand storage hopper and storage hopper capacity is 160 M.T. which is required t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... forated plate from chain bucket elevator. The blower system blows in cool air to take down temperature of heated sand. Then the cooling system strays water to perform heat-exchange cooling. The air fully contacts with hot sands to take away the moisture of the hot sands. Newly-processed sands collide and rub with each other to bring forward reproducing function. During the movement, the rubbing effects between sand particles peel off the stuck micro coating and discharge them through the dust collector system. Thus, the hot sand gets cooled and de-dusted. The sand move towards the outlet by the fluidized bed and air strike, and the cooled sand is discharged through the sand outlet. 19. Bucket elevator No. 5 It is used to transfer thermally reclaimed sand from fluid bed cooler to MMR machines (Granulators). 20. Surge Arrestor Tank No 1 Sand flow is not constant every time so that to achieve exact output surge arrestor tank is used. When tank get full then only its pneumatic valve allow Sand to flow towards MMR. 21. MMR 1 to 12 (Granulators) It's a granulator machine used for mechanical reclamation of thermally reclaimed sand. MMR centrifuge is composed of shell, base, mo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Finished reclaimed sand product stored in the 2 hoppers of 100 MT each for different grades of sand. Reclaimed sand is ready to transfer from hopper to transportation vehicle. 30. Dust collectors There are 2 no's of dust collector which are back filter type used for dust collection process. 2.15. Additional Submission By Applicant made on 26.12.2019; 1. On the date of personal hearing 12.12.2019, we have received a written submission from state authorities on above subject matter. 2. In the said submission, the learned authority has mentioned hat "The facts involved in this case lead to conclude that, it is not Job Work Service', but 'Outward Supply of Goods' and hence may be taxed @ 18% under the HSN Code No 3824. 3. We agree with the authority regarding first part of the sentence that 'The facts involved in this case lead to conclude that, it is not 'Job Work Service', but Outward Supply of Goods'. 4. Regarding the remaining part of the sentence that 'hence it may be taxed @18% under the HSN Code No 3824' we have a different opinion as follows: a. In our submission on October 09, 2019 In Annexure No 5: AAR Application (Statement of Relevant Facts), on Page N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence, may not cause any impact on taxation. 3.4 Facts involved in this case lead to the conclusion that, it is not 'Job Work Service' but 'Outward Supply of Goods' and hence may be taxed @ 18% under the HSN Code No 3824. 3.5 Further submissions are made by the jurisdictional officer as under: 3.5.1 The material value of the inward of waste foundry sand is nil. 3.5.2 The assesse has claimed set-off of ITC during April-19 to Dec-19. 3.5.3 Expenses as per the balance sheet produced by the applicant for 2018-19 Direct expenses Rs. 2959644 8/-. Indirect expenses Rs. 30358SO/-. Purchases : 18130598/-. These expenses are against the total Receipts of Rs. 71166825/- 3.5.4 The outward supply value includes Transportation changes and applicant has paid the GST @ 12% on this (Invoice no: 19-20/SH/DEC/37 dt: 07.12.2019). 3.5.5 Natural foundry sand can be used for casting work only after coating with certain adhesive chemicals and called as resin coating. After first use this coating gets burnt and makes the sand waste. This sand is the inward supply to the applicant who, merely removes these impurities and by again coating it, this sand becomes reusable. Such addition of adhesive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocess undertaken by a person on goods belonging to another registered person and the expression "job worker" shall be construed accordingly. 5.3.4 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. 5.3.5 In the present case we find that 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. We find that 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 contenti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n fact, the applicant, as reported by the jurisdictional officer, cells the final product to the foundries at Rs. 2.5 per kg. Whereas freshly mined sand is available at Rs. 3.00 per kg and the difference being very minor shows that the applicant is not a job worker in the subject case. It is clearly seen that the foundries have not supplied goods to the applicant for job work purpose. The supplied material is only waste of the foundry industry and not a by-product or outcome of any manufacturing process. 5.3.11 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. In our view, 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. 5.3.12 Applicant has referred to the decision of the Hon'ble Supreme court in the matter of M/s. Prestige Engineering (India) vs Collc. of Central Excise, Merut (1994 (73) E.L.T.497 (SC)] = 1994 (9) TMI 66 - SUPREME COURT wherein the Court has considered various examples of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ward supply does not have direct bearing on the outward value in this case, since the applicant has admitted that the inward supply of the waste sand is at Rs. Nil. As such, there is no impact of inward value on the outward supply. The jurisdictional officer has also submitted that Socio-Ecological parameters in the said case is already taken into account by the system, as 83% of setting cost is born by Central ana State governments together and hence, may not cause any impact on taxation. 5.4.2 The applicant seeks to know whether the consideration of 'NIL' value for the input i.e. used sand, will have any impact on valuation and whether their understanding to consider the 'Nil' value of the used waste sand in valuation (no impact) is appropriate. It appears, from the submissions made by the applicant 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. We are of the opinion that 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 us ..... X X X X Extracts X X X X X X X X Extracts X X X X
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