JSW Energy Limited VS Union of India

The case involves a detailed analysis of whether a proposed arrangement qualifies as “job work” under Section 2(68) of the Central Goods and Services Tax Act, 2017 (CGST Act), thereby determining eligibility for benefits under CGST and MGST. The petitioner, via an application dated 7th December 2017, approached the Advance Ruling Authority seeking clarification on the GST implications of their proposed operations.

The essence of the petitioner’s query revolves around several aspects:

1. Supply of coal or other inputs by JSL to JEL on a job work basis.

2. Supply of power from JEL to JSL.

3. Job work charges payable by JSL to JEL.

The Advance Ruling Authority, in its decision dated 5th March 2018, ruled against the petitioner’s classification of the operations as “job work.” The ruling was primarily based on the interpretation that the activities described amounted to “manufacture” as defined under Section 2(72) of the CGST Act. Consequently, the Authority concluded that the proposed arrangement did not qualify for the benefits sought and would attract GST.

The crux of the ruling hinges on the distinction between job work and manufacturing processes under GST laws. Job work, as per the CGST Act, involves processing or working on goods supplied by the principal, whereas manufacturing denotes transformation resulting in a distinct product or goods with altered characteristics. The Authority’s decision implies that the operations described by the petitioner crossed the threshold into manufacturing rather than mere job work, thereby necessitating GST liability on the transactions.

In summary, the case underscores the importance of correctly classifying operations under GST provisions to determine applicable taxes and benefits. Despite the petitioner’s intent to structure the arrangement as job work, the ruling authority’s interpretation concluded otherwise based on the nature and outcomes of the activities involved.

grounds. The first was that the arrangement did not fulfill the conditions under the Goods and Services Tax (GST) laws to qualify as ‘job work’. The second ground was that the proposed activities indeed amounted to ‘manufacture’, thereby attracting GST.

9] Feeling aggrieved, the petitioner has come up before this
Court by way of this writ petition praying for the relief indicated
in the preamble to this order.

10] Mr. S.S. Pathak, the learned counsel for the petitioner
has advanced the arguments as are delineated in the written
submissions.

The petitioner in this case appealed to the Appellate Authority after a ruling by the Advance Ruling Authority, arguing that their proposed arrangement should qualify as ‘job work’ under GST laws, even if it involved an element of ‘manufacture’. The primary contention was that the Advance Ruling Authority had rejected their claim on this basis.

The Appellate Authority, in its order dated 2nd July 2018, disagreed with the Advance Ruling Authority’s reasoning that the proposed arrangement constituted ‘manufacture’ and therefore could not be classified as ‘job work’. However, the Appellate Authority upheld the final decision of the Advance Ruling Authority based on two distinct grounds:

1. Coal, which was used in the process, did not qualify as an input under the Standard Input Output Norms (SION) for Steel products under the Foreign Trade Policy.

2. The coal used in the process would be consumed and irretrievable in the same form after the job work was completed, which did not comply with the conditions specified in Section 143 of the CGST Act regarding the return of inputs by the principal.

These grounds were termed as ‘new grounds’ in the proceedings. The Appellate Authority’s operative order stated that while processing undertaken on goods belonging to another registered person can qualify as job work even if it amounts to manufacture, the specific transaction between the petitioner and M/s. JSL did not meet the criteria under Section 143 of the CGST Act for job work. Therefore, the appeal filed by the petitioner was dismissed, modifying the ruling of the Advance Ruling Authority accordingly.

Mr. Rafique Dada, the petitioner’s senior advocate, highlighted that since the statute had

In this case, the petitioner contested a ruling by the Advance Ruling Authority that their proposed business arrangement did not qualify as ‘job work’ under the CGST Act, primarily because it involved an element of ‘manufacture’. The petitioner appealed this decision, arguing that even if the activity constituted manufacture, it could still be categorized as job work. The Appellate Authority, in its order dated 2nd July 2018, disagreed with the reasoning of the Advance Ruling Authority on this point but upheld the ruling based on two additional grounds:

1. Coal used in the process was not recognized as an input under the Standard Input Output Norms for Steel products under the Foreign Trade Policy.

2. The coal used would be irretrievable in its original form after the job work, thus failing to meet the conditions of Section 143 of the CGST Act regarding the return of inputs by the principal.

These grounds, referred to as the ‘new grounds’, formed the basis of the Appellate Authority’s decision to dismiss the appeal and modify the ruling of the Advance Ruling Authority accordingly.

The petitioner, represented by Mr. Rafique Dada, challenged this decision in court, contending that the Appellate Authority had misinterpreted statutory provisions and judicial precedents. Mr. Dada argued that the Authority had exceeded its jurisdiction by introducing new grounds that were not raised before the Advance Ruling Authority by the Revenue. He cited the Supreme Court’s decision in Reckitt & Colman of India Ltd. vs. Collector of Central Excise (1996) in support of this argument.

Additionally, Mr. Dada raised concerns about procedural fairness, claiming that the petitioner was not given an opportunity to address these new grounds or provide supporting documents, thereby violating principles of natural justice.

Given the absence of further appeal options as per the statute, Mr. Dada urged the court to scrutinize the merits of the case to prevent the impugned orders from binding the petitioner indefinitely in relation to their proposed business arrangement, especially since similar arrangements were treated as job work in other states.

In conclusion, the case revolves around the classification of a business arrangement under the CGST Act, with significant emphasis on whether activities involving both job work and manufacture can still qualify as job work, and the procedural and jurisdictional issues arising from the Appellate Authority’s decision. 

further appeal being available against the orders of the Appellate Authority, the petitioner sought redress through judicial review. The case revolves around the classification of a proposed business arrangement between the petitioner and M/s. JSL under the GST framework.

Initially, the Advance Ruling Authority denied the classification of the arrangement as ‘job work’ due to concerns that it involved ‘manufacture’ and because coal used in the process was not retrievable in its original form, which was crucial under the CGST Act. On appeal, the Appellate Authority disagreed with the reasoning that ‘manufacture’ precludes an activity from being classified as job work. However, it upheld the denial on new grounds: first, that coal used in the process did not qualify as an input under relevant trade norms, and second, that the irretrievability of coal after processing violated statutory requirements for job work under Section 143 of the CGST Act.

The Appellate Authority’s order, dated July 2, 2018, modified the decision of the Advance Ruling Authority, dismissing the petitioner’s appeal. Mr. Rafique Dada, representing the petitioner, argued before the court that the Appellate Authority had overstepped its jurisdiction by introducing new grounds not considered by the Advance Ruling Authority, citing the decision of the Supreme Court in Reckitt & Colman of India Ltd. vs. Collector of Central Excise. He also alleged a violation of principles of natural justice, arguing that the petitioner was not given an opportunity to address these new grounds or present relevant evidence.

In response, Mr. Pradeep Jetly, representing respondent No.1, defended the orders, asserting that the Appellate Authority had the discretion to uphold the ruling of the Advance Ruling Authority on different grounds. He contended that the petitioner had ample opportunity to present its case fully before the Advance Ruling Authority and that procedural fairness was maintained throughout.

The court was tasked with reviewing whether the Appellate Authority had acted within its jurisdiction and whether principles of natural justice were upheld in the proceedings. The outcome would determine the classification and future treatment of the proposed business arrangement under GST law.

In this legal case, the petitioner appealed against a decision by the Advance Ruling Authority (ARA), which held that a proposed arrangement did not qualify as ‘job work’ under GST laws because it involved an element of ‘manufacture’. The petitioner argued before the Appellate Authority that even if the process amounted to manufacture, it could still be classified as job work. The Appellate Authority disagreed with the ARA’s reasoning but upheld its conclusion based on two new grounds: first, that the raw material (coal) used in the process was not covered under standard norms for input in steel production, and second, that the coal would be irretrievably consumed in the process.

The Appellate Authority’s order dated July 2, 2018, modified the ARA’s decision, stating that while processing goods belonging to another registered person can qualify as job work even if it involves manufacture, the specific arrangement in question did not meet the conditions specified under Section 143 of the CGST Act. Consequently, the appeal filed by the petitioner was dismissed.

Mr. Rafique Dada, representing the petitioner, argued that since no further appeal was provided by statute against the Appellate Authority’s decision, the court should review the decision on its substantive merits. He contended that the reasoning of the Appellate Authority on the new grounds was contrary to statutory provisions and judicial precedents. He also alleged a violation of natural justice, claiming that the petitioner was not given an opportunity to respond to these new grounds during the appeal process.

In response, Mr. Pradeep Jetly, representing the respondent, defended the Appellate Authority’s decision, asserting that the authority had the jurisdiction to uphold the ARA’s conclusion on different grounds and that there was no procedural unfairness. He argued that the petitioner had not requested an opportunity to present additional evidence before the Appellate Authority, and thus, could not claim a denial of natural justice retroactively.

Mr. H.B. Takke, representing the State, supported Mr. Jetly’s arguments and defended the impugned orders based on their reasoning.

The court clarified that it would not review the impugned orders on their substantive merits because no further appeal was allowed by statute against the decision of the Appellate Authority. Instead, the court would evaluate the validity of the orders through the lens of judicial review under Articles 226/227 of the Constitution of India, which governs the scope of appellate proceedings.

In conclusion, the court was tasked with determining whether the Appellate Authority’s decision was legally sound, considering the principles of judicial review, and not as if it were an appellate court.

The petitioner in this legal case sought relief after the Advance Ruling Authority rejected their assertion that a proposed arrangement should qualify as ‘job work’ under GST laws, despite involving an element of manufacturing. The petitioner appealed to the Appellate Authority, which disagreed with the initial ruling that the arrangement amounted to manufacturing but upheld the decision against the petitioner based on new grounds: firstly, that coal used in the process was not recognized as an input under trade norms, and secondly, that the coal would be irretrievably consumed during the job work.

The Appellate Authority’s order on July 2, 2018 modified the ruling but ultimately dismissed the petitioner’s appeal, concluding that the arrangement did not meet the statutory conditions for job work under the CGST Act. The petitioner, represented by Mr. Rafique Dada, challenged this decision primarily on the grounds that the Appellate Authority had exceeded its jurisdiction by introducing new grounds not considered by the Advance Ruling Authority, thereby violating principles of natural justice. Mr. Dada also argued that the reasoning applied was contrary to statutory provisions and judicial precedents.

In response, Mr. Pradeep Jetly, representing the respondent, defended the Appellate Authority’s decision, asserting that there was no procedural unfairness and that the authority was within its rights to uphold the original ruling on different grounds. He emphasized that the petitioner had not raised objections to procedural fairness during the appeal process itself.

The State’s representative, Mr. H.B. Takke, supported Mr. Jetly’s arguments, reinforcing the validity of the Appellate Authority’s decision based on its reasoning.

The High Court, in its determination, clarified that since no further appeal was permitted under the relevant statutes, it would only review the decision-making process through the lens of judicial review. It cited precedents to underscore that judicial review focuses on procedural fairness rather than the merits of the decision itself. The court highlighted that its role was to ensure that the decision-making authority had not exceeded its jurisdiction, committed legal errors, or acted in breach of natural justice.

Ultimately, the court declined to reassess the merits of the case, emphasizing the limitations imposed by the absence of statutory appeal provisions. It underscored that the proceedings were not to be treated as an appellate process but as a judicial review, confirming that the decision must be evaluated based on the correctness of the decision-making process rather than the decision’s substantive outcomes.

Authority had emphasized that since the proposed arrangement involved a transformation where coal was irreversibly consumed in the process, it did not qualify as ‘job work’ under the CGST Act. This decision was appealed by the petitioner to the Appellate Authority, arguing that even if the process involved some element of ‘manufacture’, it should still be considered ‘job work’.

The Appellate Authority, in its order dated 2nd July 2018, disagreed with the reasoning of the Advance Ruling Authority that the proposed arrangement amounted to ‘manufacture’, thereby not qualifying as ‘job work’. However, it upheld the conclusion that the arrangement did not meet the conditions under Section 143 of the CGST Act, primarily because coal used in the process was not retrievable in its original form after completion of the job work. This decision was based on two new grounds introduced by the Appellate Authority:

1. Coal used in the process was not recognized as an input under the Standard Input Output Norms (SION) for Steel products.
2. The irretrievable consumption of coal in the process did not comply with Section 143 requirements for the principal to bring back the same inputs.

The Appellate Authority’s operative order dismissed the appeal and modified the ruling of the Advance Ruling Authority accordingly.

In response, Mr. Rafique Dada, representing the petitioner, contested the decision on several grounds before the court. He argued that the Appellate Authority had exceeded its jurisdiction by introducing new grounds of decision that were not raised before the Advance Ruling Authority. He cited the decision in Reckitt & Colman of India Ltd. vs. Collector of Central Excise to support the argument that such introduction of new grounds was unjustified. Additionally, he alleged a violation of principles of natural justice, claiming that the petitioner was not given an opportunity to address these new grounds or provide documentary evidence.

On the other hand, Mr. Pradeep Jetly, representing the respondent, defended the impugned orders, asserting that the Appellate Authority had the discretion to uphold the decision of the Advance Ruling Authority on different grounds. He argued that there was no procedural unfairness or denial of natural justice during the appeal process.

The court deliberated on these arguments, emphasizing that the absence of further appeal provisions in the statutes meant the challenge had to be reviewed under principles of judicial review, not as an appellate proceeding. It highlighted that judicial review focuses on the decision-making process rather than the decision itself, assessing whether the authority acted within its jurisdiction, followed due process, and avoided errors of law.

Ultimately, the court declined to delve into the substantive merits of the case but agreed to review whether there was any procedural impropriety that could invalidate the Appellate Authority’s decision. The case was set to determine if there was a breach of natural justice during the appeal proceedings, especially concerning the introduction of new grounds and the petitioner’s opportunity to respond.

In conclusion, the court framed the issue for determination based on principles of judicial review and set out to evaluate whether the decision-making process of the Appellate Authority was fair and compliant with statutory requirements.

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