TMI Blog2022 (10) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... to be classified under HSN 2701 and are taxable at 5% GS T Rate + Rs. 400 PMT Compensation Cess. Whether Applicant is eligible to avail Input tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery job worker for cleaning? - HELD THAT:- Where the goods are being received in lots or installments. the registered person shall be entitled to take credit upon receipt of the last lot or installment. Thus, if the applicant fulfils the eligibility conditions as prescribed under Section 16 of CGST Act, 2017 PGST Act, 2017 and if the type of ITC do not fall under the categories prescribed under Section 17 of CGST Act, 2017 PGST Act, 2017. the applicant is eligible to avail Input Tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning. Further, the principal shall be entitled to avail ITC in relation to goods sent directly to the premises of job-worker. If the answer to above question is yes and ITC is admissible, what is the admissible proportion of Input Tax Credit? - HELD THAT:- The formula prescribed under Rule 42 of CGST PGST Rules, 2017 for manner ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ronment friendly manner. (6) Terms of the engagement with washery job worker, inter-alia, include:- a) That washery/job worker shall directly lift raw coal from CIL sources on behalf of Applicant by road; b) That washery job worker is assigned the job of cleaning of coal and the limit of ash content, as required by the Applicant, is informed to the washery /job worker in advance; c) That after beneficiation of raw coal. washery job worker shall dispatch the washed coal to Applicant's power plants via rail, and d) That with respect to 'coal rejects', it is the property of Applicant but will be disposed off directly by washery/job worker and an invoice will be raised by Applicant in respect of such 'coal rejects'. 3. QUESTION(S) ON WHICH ADVANCE RULING IS SOUGHT 1. Whether the coal rejects' whose invoice is raised by Applicant upon washery/job-worker, is taxable under GST Act and Compensation Cess Act in the hands of Applicant? 2. If the answer to above question is yes. whether applicant is eligible to avail Input Tax Credit (ITC) of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/jo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eficiation by washery/job worker certain low quality coal is also generated (having ash more than the prescribed %) which is commonly referred to as 'coal rejects which is disposed off/sold directly by the washery/Job worker in an environment friendly manner. (3) Terms of the engagement with washery/job worker, inter-alia, include:- a) That washery/job worker shall directly lift raw coal from CIL sources on behalf of Applicant by road; b) That washery job worker is assigned the job of cleaning of coal and the limit of ash content, as required by the Applicant, is informed to the washery /job worker in advance; c) That after beneficiation of raw coal. washery job worker shall dispatch the washed coal to Applicant's power plants via rail, and d) That with respect to 'coal rejects', it is the property of Applicant but will be disposed off directly by washery/job worker and an invoice will be raised by Applicant in respect of such 'coal rejects'. 5.2 The applicant has made the following additional submissions dated 03.02.2022:- (i) That, the entire process of from purchase of Coal to its washing in Washery is detailed in the flow c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Applicant is a valid application (iii) That, enquiry was initiated by the office of DGGI in September 2020. i.e after more than 5 months of filing application with Hon'ble AAR. Punjab and thus, since no proceeding was pending then, proviso to sub-section (2) of Section 98 ibid, must not be applicable upon the Applicant as a valid application was filed by the Applicant. (iv) That the Washery process in detail is enclosed as Annexure- B.C.D. That, based on procedure explained in Annexures. it is clear that coal rejects is obtained in two formats, i.e. the rejects obtained from Rotary Breaker (+100 nun sized stones and shale) as well as such coal pieces which are heavy and have high ash content and accordingly, lie at the bottom of the floor of HM bath (-100 mm sized stones shale and very high ash content coal) That, it can safely be concluded that coal rejects are not new product formed after applying any manufacturing procedure or job work process and instead such raw coal which is above 100 mm or have high ash content and lie down in HM Bath are simply 'segregated' and regarded as 'coal rejects'. (v) That, legible copies of sample Invoices along w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y). Telephone Expenses, Security Guard expenses, Accounting, Auditing or Legal Services (if any). Office or Factory maintenance expense (if any), etc. Further, all the similar expenses which are in the nature of common expenses for providing both output supply of electricity coal rejects has to be first availed by the appellant and then, admissibility of the same has to be calculated in sale/turnover ratio. However, on the other hand, in case Appellant can avail ITC as it is on input tax paid on purchase of raw coal from CCL or CIL sources of only so much quantity which is regarded as coal rejects, in the opinion of the Applicant, the same is much more simple, logical directly mappable for the purposes of availment of ITC. For instance, 1000 tonnes of raw coal is purchased out of which 800 tonnes produced while 200 tonnes of coal reject is segregated In this case, Appellant can directly either avail ITC of Input Tax paid on purchase of 200 tonnes of raw coal form CIL or CCL sources or Appellant has to avail entire ITC of Input Tax paid on purchase of 1000 tonnes of raw coal along with other common services listed supra and thereafter, determine proportionate elig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. But during this whole process. raw coal, washed coal and coal rejects remains the property of Applicant. Applicable HSN code for coal is 2701 and taxable at 5% GST Rate + Rs. 400 PMT Compensation Cess. Chapter Heading, Sub-Heading/Tariff item Description of Goods 2701 Coal, briquettes, avoids and similar solid fuels manufactured from coal The first issue on which advance ruling has been sought is Whether the coal reject whose invoice is raised by Applicant upon washers/job-worker is taxable under GST Act and Compensation Act in the hands of Applicant? On this question, it is submitted that coal rejected are taxable under GST Act and Compensation Act vide press release dated 18.01.2018 issued by the Press Information Bureau, Government of India, ministry of Finance recommended for changes in GST/IGST Rate and clarification is respect of GST rate on certain goods as per discussion held in the 25th GST Council Meeting held on 18th January 2018, which is extracted under (Para M. Sr no-3). Sr.No. Chapter /Heading / Sub-Heading/Tariff-item ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s clause, it shall be deemed that the registered person has received the goods or, as the case may be, services- (i) where the goods are delivered by the supplier to a recipient or any other person on the direction of such registered person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to goods or otherwise; (ii) where the services are provided by the supplier to any person on the direction of and on account of such registered person. (c) subject to the provisions of section 41, the tax charged in respect of such supply has been actually paid to the Government, either in cash or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: On the issue of third question which is If the answer to above question is yes and ITC is admissible, what is the admissible proportion of Input Tax Credit? . As per sub-section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... applicant submitted the additional documents sought which were also brought on record. On the last hearing of the case i.e. on 05.08.2022. The applicant submitted that they have nothing more to submit on the matter Accordingly the proceedings of the case were concluded. 8. DISCUSSIONS AND FINDINGS:- 8.1 The submissions made by the applicant in his advance ruling application. Additional submissions and the submissions made at the time of personal hearings have been carefully examined and analysed. 8.2 The applicant is a Punjab Government undertaking engaged in generation, transmission and distribution of electricity and is registered under Goods and Service Tax under registration No. 03AAFCP51 20Q1ZC. Transmission or distribution of electricity is exempt under GST Act, Vide notification No. 12/2017 dated 28th June, 2017 (Tariff heading 9969). for the generation of electricity, they use an essential raw-material require Coal which is procured from Coal India Limited (CIL). In order to comply with the guidelines laid down by the Ministry of environment and Forest, they are mandatorily required to get the raw coal washed before captive consumption for meeting the stipulate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Tariff-item Description Present Rate Modification /Clarification recommended 3 2701 Coal rejects 5% + Rs. 400 PMT Compensation Cess Coal rejects fall under heading of 2701 and attract 5% GST and Rs. 400 PMT Compensation Cess Accordingly as per above clarification. Coal rejects are to be classified under HSN 2701 and are taxable at 5% GS T Rate + Rs. 400 PMT Compensation Cess. It is pertinent to mention here that vide Notification no. 02/2018-compcnsalion cess (Rate) dated 26.07.2018 Nil rale of GST compensation cess on Coal rejects supplied by a coal washery, arising out of coal on which compensation cess has been paid and no input Tax credit thereof has been availed by any person vide notification No. 02/2018- compensation cess (Rate) dt. 26.07.2018 is notified. As the applicant is not covered under the definition of a coal washery, the applicant is not admissible for any exemption from compensation cess. Also, no other exemption notification has been issued in this respect in this regard. 8.5 Now, as the an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or through utilisation of input tax credit admissible in respect of the said supply; and (d) he has furnished the return under section 39: Provided that where the goods against an invoice are received in lots or instalments, the registered person shall be entitled to take credit upon receipt of the last lot or instalment: and. Section 17. Apportionment of credit and blocked credits. (1) Where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business. (2) Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies. (3) The value of exempt supply under sub-section (2) shall be such as may be prescribed, an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espect of such services shall be available- (i) where the motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) are used for the purposes specified therein; (ii) where received by a taxable person engaged- (I) in the manufacture of such motor vehicles, vessels or aircraft; or (II) in the supply of general insurance services in respect of such motor vehicles, vessels or aircraft insured by him; (b) the following supply of goods or services or both- (i) food and beverages, outdoor catering, beauty treatment, health services, cosmetic and plastic surgery, leasing, renting or hiring of motor vehicles, vessels or aircraft referred to in clause (a) or clause (aa) except when used for the purposes specified therein, life insurance and health insurance: Provided that the input tax credit in respect of such goods or services or both shall be available where an inward supply of such goods or services or both is used by a registered person for making an outward taxable supply of the same category of goods or services or both or as an element of a taxable composite or mixed supply; (ii) membership of a club, health and fitness cent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 16 of CGST Act. 2017 and if the type of ITC do not fall under the categories prescribed under Section 17 of CGST Act, 2017. the applicant is eligible to avail Input Tax Credit of GST and Compensation Cess of raw coal brought from its supplier and transferred to washery/job worker for cleaning. But it is imperative to discuss Section 19 of CGST Act, 2017 as the applicant is directly sending its inputs to the premises of its job-worker i.e. Coal Washery Units. Section 19. Taking input tax credit in respect of inputs and capital goods sent for job work- (1) The principal shall, subject to such conditions and restrictions as may be prescribed, be allowed input tax credit on inputs sent to a job worker for job work. (2) Notwithstanding anything contained in clause (b) of sub-section (2) of section 16 the principal shall be entitled to take credit of input tax on inputs even if the inputs are directly sent to a job worker for job work without being first brought to his place of business. And, therefore, as provided in terms of above Section 19 of the CGST Act PGST Act, 2017 that principal shall be entitled to avail ITC in relation to goods sent directly to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The proposal of the Applicant is not as per the provisions of the CGST Act, 2017 and the rules and corresponding PGST Act, 2017 and the rules made there-under. In terms of Section 11 of The Goods And Services Tax (Compensation to States) Act, 2017. the provisions of the Central Goods and Services Tax Act. 2017. the Punjab Goods and Services Tax Act, 2017 and the rules made there-under, including those relating to assessment, input tax credit, non-levy, short-levy, interest, appeals, offences and penalties, shall, as far as may be, mutatis mutandis, apply, in relation to the levy and collection of the cess leviable under section 8 on the intra-State supply of goods and services, as they apply in relation to the levy and collection of central tax state tax on such intra-State supplies under the said Act or the rules made there under. Accordingly, it can be stated that the formula prescribed under Rule 42 of CGST PGST Rules, 2017 for manner of determination of input Tax credit in respect of inputs or input services and reversal thereof will be applicable in both cases i.e GST and Compensation Cess. The applicant has also requested to allow reversing the GST and Compe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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