TMI Blog2023 (1) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... nership to the Applicant. This is apparent in the Job Tanning order given by the customer (M/s Century Overseas). The terms and conditions stipulate that Applicant (M/s Zuha Leathers) should return the goods without any damage. Hence, it is clear that the Applicant in the instant case is the job worker, who has to process the raw hide supplied by the Principal and after tanning process (job work) return the same to the Principal. If the activity of the Applicant is a service by way of treatment or processing undertaken by a person on goods belonging to another registered person, it is rightly classifiable as processing of hides, skins and leather falling under Chapter 41 in the First Schedule to the Customs Tariff Act, 1975 (51 of 1975) and as per (i)(e) (para 6.7) and applicable CGST rate is 2.5% and applicable SGST rate is 2.5%. However, if the activity of Applicant is undertaken on physical inputs (goods) which are owned by persons other than those registered under the CGST Act, then it falls within entry at item (iv) and applicable CGST rate is 9% and applicable SGST rate is 9%. - TN/36/AAR/2022 - - - Dated:- 30-11-2022 - SHRI. R. GOPALSAMY, I.R.S., AND TMT. N. USHA, MEM ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tamil Nadu with GST1N: 33AAACZ2099M1ZW. Their principal place of business is located at Chennai with the production facility (tannery for processing hides and skins) at Vaniyambadi. 2.1. The Applicant is basically a tanner carrying out the activity of tanning process on hides and skins (Chapter 41) and selling the finished product viz., finished leather both in local and as well as overseas markets by way of exports. Apart from their own manufacturing activity, the Applicant is carrying out job tanning (work) i.e., carrying out the activity of tanning process on the hides and skins owned by others. In the process of tanning, the applicant procures and transfers tanning chemicals [HSN Code Chapter 32, 38 39] which are chargeable to tax @ 18%. 2.2. The contract of tanning, essentially involves either - a. Conversion of raw hides and skins (Chapter 41) into finished leather (Chapter 41) or b. Conversion of raw hides and skins into wet blue or crust leather or c. Conversion of wet blue or crust leather to finished leather or d. Any other intermediary process/es. 2.3. In all cases, the intent of the contract is to process or tan the required type or finis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is supply of service under SAC 9988 and will attract 18% GST. In the case of M /s Kondody Autocraft (India) Pvt. Ltd. AAR, vide Order No. KER/39/2019 dated 02.03.2019 it was held that fabrication of body on the chassis supplied by the customer is a service covered under SAC Code 9988-Manufacturing services on physical inputs (goods) owned by others and thereby attract 18% GST. 4.0 Personal hearing was held in digital platform on 17.05.2022. The Authorized Representative (AR) of the Applicant, Thiru. G.Pari, appeared for the hearing virtually. The AR reiterated the submissions made in their application. AR referred to the decision of TNAAR in the case of Tube Investments of India Ltd., wherein even when the goods are transferred on body building as job work, the activity is considered as Service under SAC 9988. The Applicant was asked to furnish the following documents. 1. Copy of contract for job work 2. Write up on process undertaken as job work 3. write up on process undertaken as manufactures (own account) 4. Invoice raised for job work 5. Costing adopted to arrive at the job work value 4.1 Subsequently, the Applicant submitted the fol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant. They had further submitted their comments on the subject which can be summarized as under: The principal provides raw skin or semi processed leather to the job worker who processes the goods and returns semi-finished/finished leather back to the principal. Though chemicals used constitute a major part of the process and billing, this supply must be considered as a composite supply where processing of the skin/leather is to be considered as the principal supply. Hence the supply could be classified under Items i(e) processing of hides, skins and leather falling under chapter 41 in the First Schedule to the customs Tariff Act, 1975 (51 of 1975) under the head 9988 chargeable to tax under CGST @2.5% and SGST @ 2.5%. 6.0 We have carefully examined the statement of facts, supporting documents filed by the Applicant along with application, submissions/Additional submissions made during personal hearing and thereafter the comments of the State Jurisdictional Authority. The Applicant is basically a tanner carrying out the activity of tanning process on hides and skins (Chapter 41). The Applicant is before us seeking ruling on the following question: Whether the ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kins and receiving the finished product, does not transfer the ownership to the Applicant. This is apparent in the Job Tanning order given by the customer (M/s Century Overseas). The terms and conditions stipulate that Applicant (M/s Zuha Leathers) should return the goods without any damage. Hence, it is clear that the Applicant in the instant case is the job worker, who has to process the raw hide supplied by the Principal and after tanning process (job work) return the same to the Principal. In the course of the tanning process, Applicant is using some tanning chemicals which are consumed in the process. It is not unusual for a job worker to add some inputs to aid his job work process. But, it still remains a job working process and it is pertinent to note in the instant case that both the raw material (hides skins) and finished product (finished leather) fall in Chapter 41. Also, it cannot be treated as composite supply, if we analyze the illustration given in the definition of Composite Supply cited supra. Therefore, the activity of the Applicant in processing (tanning), the raw hide owned by the Principal into finished leather falls within the purview of job work. 6.6 Hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (iii) (iv) Manufacturing services on physical inputs (goods) owned by others, other than (i), (ia), (ib), (ic), (id), (ii), (iia) and (iii) above. 9 9 18 - 6.8 Further, CBIC vide Circular NO. 126/45/2019-GST [F. NO. 354/150/2019-TRU], dated 22-11-2019 clarified and distinguished that item (id) and (iv) in the above heading 9988, as it pertains to goods of unregistered persons. The relevant paragraph of the circular is entrusted as below: 4. In view of the above, it may be seen that there is a clear demarcation between scope of the entries at item (id) and item (iv) under heading 9988 of Notification No. 11/2017-Central Tax (Rate) dated 28-6-2017. Entry at item (id) covers only job work services as defined in section 2(68) of CGST Act, 2017, that is, services by way of treatment or processing undertaken by a person on goods belonging to another registered person. On the other hand, the entry at item (iv) specifically excludes t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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