Sending of Raw Materials for Manufacture of Industrial Gas by IOCL would not qualify ‘Job Work’: AAR [Read Order]

The Odisha Authority for Advance Rulings (AAR) has held that the activity of sending of raw materials by IOCL for the manufacture of inductrial gas would not qualify ‘job work’ for the purpose of the Central Goods and Services Tax Act, 2017.

The applicant has entered into an agreement with M/s Praxair for construction of Hydrogen and Nitrogen Gas Plant inside the applicants premises at Paradip. Pursuant thereto, M/s Praxair had constructed, installed and successfully commissioned the Hydrogen and Nitrogen Gas Plant inside the applicants premises. M/s Praxair then leased the said plant for a period of 15 years to the applicant for the consideration reserved on the terms and conditions of the contract/ agreement. As per the contract/agreement, M/s Praxair is charging lease/rental charges and 0 & M charges for Nitrogen and Hydrogen Plant.

The department was of the view that sending of inputs to job worker and bringing back the processed/converted gas fulfils the term’ job work’ defined under Section 2(68) read with Section 143 of the CGST & OGST Acts. Further, it has also been stated that since Praxair collects job work charges or processing charges, the principal would be liable to pay agreed job charges to the job worker along with GST @18% vide HSN 9988.

The AAR bench observed that M/s Praxair is manufacturing industrial gases out of the raw material supplied by the applicant and the gases so manufactured are exclusively used by the applicant. But, there is no specific job work agreement between the applicant and M/s Praxair.

“No job works charges or any processing/conversion charges of inputs has been claimed by M/s Praxair as evident from the invoices raised to the applicant. Further, the manufacturing of gases is not being done at M/s Praxair’s production plant’. Therefore, the concept of ‘Job Work’ is not present in the entire transaction,” the AAR said.

Based on the above observations, the AAR held that the activities being undertaken in the applicant’s premises/production plant do not qualify for ‘Job Work’ under section 2(68) of Central Goods and Service Tax Act,2017 (CGST Act) and Odisha Goods and Service Tax Act,2017 (OGST Act) and Section 143 of the said Acts.

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