In re M/s. Inox Air Products Pvt. Ltd. (AAR Gujarat)
(a) The activity undertaken by the applicant falls under the ‘Job Work’ as defined under Section 2(68) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017.
(b) The applicant is liable to pay Goods and Services Tax on the value of supply determined under Section 15(1) of the Central Goods and Services Tax Act, 2017 and the Gujarat Goods and Services Tax Act, 2017.
FULL TEXT OF ADVANCE RULING
The applicant M/s. INOX Air Products Private Limited (herein after also referred to as ‘INOXAP’) is engaged in the business of manufacture and supply of industrial gases, including Oxygen, Nitrogen, Argon etc. M/s. Essar Steel India Limited (herein after referred to as “M/s. Essar”) is in the business of manufacture and supply of steel and has one of its steel plants at Hazira, Gujarat. M/s. Essar requires certain quantities of Oxygen, Nitrogen and Argon on a continuous and dedicated basis, to manufacture steel at their Steel Plant. Accordingly, the applicant has entered into a Job Work Agreement dated 07.02.2014 with M/s. Essar, in terms of which the applicant acts as a job worker for M/s. Essar.
2.1 M/s. Essar undertakes to provide the necessary goods such as Electricity, Industrial quality water to the applicant on a free-of-cost basis, using which the applicant manufactures industrial gases (Oxygen, Nitrogen and Argon) for Essar on Job Work basis. It is submitted that the arrangement is on a job work basis, accordingly, the title to the electricity and industrial water remains with M/s. Essar and M/s. Essar is also the owner of the gases manufactured by the applicant using the said electricity and water.
2.2 It is submitted that the gases so produced are further captively consumed by M/s. Essar in its steel manufacturing operations. In order to ensure continuous availability of the gases, the applicant’s gas plant is located at a designated land within the premises of the Steel Plant. The applicant has obtained a separate GST registration for this premises.
2.3 The mechanics of the transaction and consideration payable by M/s. Essar to the applicant for the manufacture and supply of gases is as follows :-
a. The applicant will raise a daily invoice for the fixed and variable job work charges for each product, based on the quantum cleared on that day;
b. At the end of each month, the applicant will raise a supplementary invoice for ‘additional consideration’ for the gases supplied in that month, equivalent to the difference between the monthly fixed and variable job work charges (as agreed by the parties) less the fixed and variable job work charges billed on a daily basis. A separate supplementary invoice will be raised for gas supply and for supply of vaporised liquid gas.
c. At the end of each month, a supplementary invoice will also be raised on account of WPI / CPI escalation on the variable job work charges, based on the WPI / CPI index for the previous quarter. Again, a separate supplementary invoice will be raised for gas supply and for supply of vaporised liquid gas.
d. One time job work charges charged for production within the first 30 days post commencement of production.
e. Job work charges to be charged for operation of plant in excess of 355 days a year (subject to a maximum of 5 days).
2.4 It is submitted that under the pre-GST regime, the applicant was duly discharging Excise duty on the gases supplied to M/s. Essar at the time of their removal from the applicant’s premises. Since the applicant was acting as a job worker for Essar, the valuation was carried out as per Rule 10A of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000 (herein after referred to as the ‘Central Excise Valuation Rules, 2000’). Further, since the gases were captively consumed by M/s. Essar, Rule 8 of Valuation Rules was also pertinent, which mandated the payment of Central Excise Duty on the cost of manufacturing plus a ten per cent mark-up. In light of Rule 10A read with Rule 8 of the Valuation Rules, the applicant discharged the Central Excise Duty on an assessable value comprising of the following:
(a) Job Work Charges payable by Essar to applicant;
(b) The value of electricity and industrial water provided by Essar;
(c) Notional rent for the designated land;
(d) Escalation on account of WPI / CPI
Plus a ten per cent mark-up on the aforesaid.
