ODISHA APPELLATE AUTHORITY FOR ADVANCE RULING

GOODS AND SERVICE TAX

C .R. Building (GST Bhawan), Rajaswa Vihar,

Bhubaneswar - 751 010, Odisha

Ph: 0674-258 9935.2588672. Fax: 0674-258 9938,

Email. ccu-cexbbr@nic.in

(CONSTITUTED UNDER SECTION 99 OF THE ODISHA GOODS AND SERVICES TAX ACT, 2017)

BEFORE THE BENCH OF

1) Shri Suresh Kishnani, Member (Chief Commissioner, GST, Central Excise and Customs, Bhubaneswar Zone)

2) Shri Sushil Kumar Lohani. Member (Commissioner, Commercial Taxes & GST, Odisha)

At the outset, we would like to make it clear that the provisions of both the Central GST Act, 2017 and of Odisha GST Act, 2017 are the same except for certain provisions. Therefore, unless a mention is specifically made to such dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the OGST Act.

2. The present appeal has been filed under section 100 of the Central Goods and Service tax Act, 2017 and Orissa Goods & Services Tax Act 2017(hereinafter referred to as the CGST Act and OGST Act) by M/s. Indian Oil Corporation Limited, Paradip Refinery, PO/At: Jhimani, Via: Kujang, Dist. Jagatsinghpur, Odisha -754141 (herein after referred to as the 'Appellant *) against the Advance Ruling order no. No. 03/ ODISHA-AAR/2021-22 dated 15-12-2021 pronounced by the Odisha Authority for Advances Ruling (OAAR). The Appellant has received the Advance Ruling order on dated 26-02-2022 and filed the appeal before the Appellate Authority for Advance Ruling, Odisha, on 24-03-2022 which is well within the time limit of one month as prescribed under section 100 of the Central Goods and Service tax Act, 2017 and the Orissa Goods and Services Tax Act 2017. The Appellant has also paid the requisite fee of 20,000/- on 23-03-2022 under Rule 106 of the Central Goods and Service Tax Act, 2017,

3.0 BRIEF FACTS OF THE CASE:

3.1 M/s. Indian Oil Corporation Limited, Paradip Refinery, is a public sector undertaking, bearing GSTIN No. 21AAACI1681G1Z1 for its Refinery business and 21AAACI1681G6ZW for its Petrochemical business. The Appellant is also registered in other States throughout India, The Appellant owns and operates 15 MMTPA oil refinery in the state of Odisha located at Paradeep and refines crude oil and produces several petroleum products at this location. The Appellant requires Hydrogen gas, Nitrogen gas and HP steam for its refining activity, collectively referred to as Industrial Gases'. The industrial gases can be obtained from inputs such as Naphtha and other utilities such as Demineralized water ('DM water'), power, cooling water, service water, instrument air etc.

3.2 That pursuant to a tender floated by Appellant , M/s Praxair India Private Limited ("Praxair"), was awarded a contract for the Construction, Commissioning, and Leasing and thereafter for Operating and Maintaining a new Hydrogen & Nitrogen Plant within the IOCL refinery complex at Paradeep for supplying of industrial gas on Build-Own-Operate 1BOQ1 basis. Under this agreement, all the inputs required for Hydrogen plant and Nitrogen plant like naphtha, DM water, cooling water, service water, fire water, steam and power all supplied by the Appellant to M/s. Praxair India Private Limited located in its Refinery Complex at Paradeep for manufacturing of industrial gases as the final product. The final products are send back to the Appellant by M/s. Praxair India Private Limited for the exclusive utilization in the refinery processes. All the output products resulted after processing are transferred to the Appellant through pipeline. The ownership of the input and output products remain with the Appellant only.

3.3 In the above back ground, the Appellant approached to Honble Advance Ruling Authority, Odisha (AAR) vide application no AD211120006200H dated 25.11.2020 for getting an advance ruling on the following issues:-

(i) Whether sending of inputs (Naphtha, DM water, Power, Cooling water, service water and instrument air) by the Appellant to M/s. Praxair India Private Limited and receiving back of industrial gases (Hydrogen gas, Nitrogen gas and HP steam) under the lease agreement vail fall under 'job work' in terms of section 2(68) of Central Goods and Service Tax Act, 2017 (CGST Act) and Odisha Goods and Service Tax Act, 2017 (OGST Act)?

(ii) Whether all the payments under the lease agreement will attract GST as applicable to Job Work?

3.4 After detailed examination of the facts of the case along with the supporting documents, the Authority for Advance Ruling has observed that the concept of 'Job work' is not present in the aformentioned entire transaction on the following grounds;-

(i) The plant is no more under the control and possession of M/s. Praxair India Private Limited, because it has been leased to the Appellant on a monthly rent basis for 15 years.

(ii) There is no specific job work agreement between the Appellant and M/s. Praxair India Pvt Ltd.

(iii) No job work charges or any processing/conversion charges of inputs have been claimed by "Praxair" as evident from the invoices raised to the Appellant .

(iv) As per agreement M/s. Praxair India Pvt Ltd. is raising six invoices each month for the service rendered under the agreement to Appellant which is as follows:-

(a) two for fixed lease charges,

(b) two for fixed operation & maintenance charges, and

(c) two for variable operation & maintenance charges at the rate of 18%.

3.5 Before the Advance Ruling Authority, Odisha, the Appellant has submitted its agreement and O&M agreement. They mentioned the relevant clauses of both of the above agreement viz: Article no.3 (build), Article no. 4 (own & lease), Article no, 5 (Operate), Article no,6 (supply), Article no.7 (quantity), Article no. 8.1 (Specification) and Article no,8.2 of lease agreement for Hydrogen Plant and Nitrogen plant. They have also mentioned the Article no. 5 of Operation & maintenance Agreement for hydrogen Plant before the Appellate Authority for Advance Ruling.

3.6 Then, Authority for Advance Ruling has pronounced the ruling vides Order No. 03/ ODISHA-AAR/2020-21 dated 15.12.2021 and passed the ruling that:-

i) The activities being undertaken in the Appellant '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 said Acts.

ii) The Appellant 's next question "Whether all the payments under the contract will attract GST as applicable to Job work?" is not maintainable on the ground already stated supra.

4.0 Grounds of appeal

Being aggrieved by the impugned order dated 15-12-2021, the Appellant has filed the appeal before this Hon'ble Appellate Authority on the following grounds:-

4.1 It submitted that even though the consideration under this agreement is being charged under three different heads (which are "Fixed lease charges". "Fixed Operation & Maintenance Charges" & "Variable Operation & Maintenance Charges"}, in sum and substance this is a job work agreement. The parties to this agreement never intended it be a simple lease agreement. This intention of parties has also been brought forward in the preambles of the Lease agreement & Operation & Maintenance agreement.

4.2. The Appellant submitted that as per the agreement, Praxair has to construct, commission, lease and thereafter operate and maintain the Hydrogen and Nitrogen plant. The plants shall always remain the property of Praxair. It is trite law that for the purpose of ascertaining the true purpose objective of any transaction, entire document or contract has to be read as a whole and mere reliance on some part of the contract, divested from its context, would not be a correct approach. Hence the contention of the AAR that control and possession of production plant is not with Praxair is not true.

4.3 The Appellant further submitted that the control or possession of the production plant or the facility where processing is being carried out by Praxair has never been the criteria for determining whether the activity would fall under job work or not, as defined in clause (68) of section 2 of the CGST Act, 2017.

4.4 The Appellant also submitted that the activity under Build-Own-Operate (BOO) contract between the Appellant and Praxair is squarely covered within the ambit of job work' as defined in clause (68) of section 2 of the CGST Act, 2017 and all the payments made by the Appellant under the agreement are in consideration of job work services provided by M/s. Praxair India Private Limited.

4.5 As per the terms and conditions of the agreement, Praxair has to construct, commission, lease and thereafter operate and maintain the Hydrogen and Nitrogen plant. The plants shall always remain the property of M/s. Praxair India Private Limited. The Appellant has submitted that the contention of the AAR, Odisha on control and possession of production plant is not with Praxair, is not true. In support of their submission they have also relied upon the following case.-

i. Gujarat Authority of Advance Ruling in the case of Inox Air Products Private Limited [2018(14) GSTL 147(AAR-GST)] and

ii. Kerala Authority for Advance Ruling in the case of Bharat Petroleum Corporation Ltd [2018 (19) GSTL 119 (AAR-GST)].

4.6 Aggrieved by the order of the Advance Ruling Authority, Odisha, the Appellant has filed the present appeal before this Honble Appellate Authority making prayers to:-

(a) set aside or modify the impugned advance ruling passed by the Authority for Advance ruling as prayed above,

(b) Confirm that all the payments made by Appellant to M/s Praxair under the contract will attract GST as applicable to Job work,

(c) Grant a personal Hearing, and

(d) Pass any such further or order(s) may be deemed fit and proper in facts and circumstances of the case.

5.0. Personal Hearing;

5.1 In order to meet the principle of natural justice, the Odisha Appellate Authority for Advance Ruling provided an opportunity to the Appellant for representing their case by way of Personal Hearing on 07.06.2022 at 04.30 P.M. at the Office of the Commissioner of Commercial Taxes and GST, Cuttack, Odisha- 753001 The Appellant attended the Personal Hearing through their authorized representatives Sri Ramesh Chandra Jena, Advocate, Sri Satyaranjan Behera, GM (F), IOCL and Sri Biswadipak Mohanty, SFM, IOCL. During the personal hearing, the authorized representatives have made the additional submissions and provided copy of each of the existing contracts. They reiterated their oral submission on job work & requested to decide the case based on the submission which have already been made in their appeal application and also requested to decide the case favourably on merit.

6.0 Discussion & Findings:

6.1 We have carefully gone through the facts of the case and submissions submitted by the Appellant in their application as well as the arguments advanced by the representatives of the Appellant during the personal hearing. We have also examined the order of the Advance Ruling Authority, Odisha, issued vide order No. 03/ ODISHA-AAR/2021-22 dated 15-12-2021 wherein the Advance Ruling Authority, odisha has observed that the activities undertaken by Praxair in the Appellant s' premises on the input supplied by Appellant do not qualify for "Job work" on the following two grounds:-

i. That, there is no specific job work agreement between the Appellant and M/s Praxair. No job works charges or any processing /conversion charges of inputs have been claimed by M/s Praxair as evident from the invoices raised to the Appellant .

ii. That, the plant is not under the control and possession of M/s. Praxair India Private Limited.

6.2 Now the question before us to decide whether the operation carried out by M/s Praxair will be treated as job work or not, under the lease agreement, after taking into account of the submission made by the Appellant against the above two vital observations raised by the Advance Ruling Authority, Odisha.

6.3 We find that the Appellant has submitted lease agreement and O&M agreement for both of the hydrogen plant and nitrogen plant. On going through both of these agreements of hydrogen plant and nitrogen plant, we find that

M/s Praxair has given the production plant to the Appellant on lease for 15 years, which is clearly mention in the para 1.1 of the agreement which is reproduced below:-

"the Lessor (M/s. Praxair India Private Limited) does hereby demise unto the Lesee (Appellant) by way of lease the production plant to hold the same unto the Lessee for a period of 15(fifteen) years from the effective date, paying therefore a monthly rent as hereinafter mentioned the Lessor acknowledges that vacant physical and peaceful possession of the production plant has been handed over to the Lessee on the effective date. "

6.4 From the above para it is clear that the plant is not under the control and possession of M/s. Praxair India Private Limited; rather it has been handed over to the lessee (the Appellant i.e IOCLJ on a monthly rent basis for 15 years. We have raised this point to the authorized representative of the Appellant that the plant has been given on lease to the Appellant for 15 years. The Authorized representative admitted the said fact and could not convince us to negate the ruling given by the Advance Ruling Authority, Odisha based on the above facts.

6.5 In such a situation the service rendered by them raises questions to accept as a job work. Therefore, we find that the agreement held between M/s. Praxair India Private Limited and the Appellant is a simple lease agreement' and not a 'job work agreement' where M/s. Praxair India Private Limited has no control and possession over the place where the inputs supplied by the Appellant are processed.

6.6 Further, going through the O&M agreement of hydrogen plant and nitrogen plant which deals with fixed/variable operation & maintenance charges, we find that M/s. Praxair India Private Limited (as Contractor) has entered an agreement as Tripartite Agreement of assignment with the Appellant (as IOCL) for Operating and Maintaining a new Hydrogen & Nitrogen Plant within the refinery complex, Paradeep wherein, in Para 3.1 to 3.3 of the agreement it has been clearly mentioned that:-

" IOCL can engage contractor to carry on the operation and maintenance of the Production Plant as on and from the Effective Date he personnel / employees or workers engaged in the Production Plant by the Contractor for operating the same shall in no way be the employee of IOCL"..............

6.7 It is clear from the above, that the contractor (M/s. Praxair India Private Limited) can carry out the work for operation and maintenance of the production plant under the specific control of IOCL. M/s. Praxair India Private Limited and it never charges any processing or conversion charges because none of such clauses mentioned for such charges in the lease agreement and O&M agreement.

Therefore, we are of the considered view on the Appellant's claim that M/s Praxair uses Plant to produce Hydrogen and Nitrogen Gas by using the inputs provided by the Appellant is a job work, is not acceptable.

6.8 The Appellant in its original application as well as in its additional submission has cited the two judgments on similar issue. The cited cases are as follows:-

i. Gujarat Authority of Advance Ruling in the case of M/s Inox Air Products Private Limited [2018(14) GSTL 147(AAR

GST)] and

ii. Kerala Authority for Advance Ruling in the case of Bharat Petroleum Corporation Ltd [2018 (19) GSTL 119 (AAR-GST)].

6.9 We have gone through the judgment given by the Authority of Advance Ruling, Gujrat in the case of M/s Inox Air Products Private Limited [2018(14) GSTL 147(AAR-GST). In this ruling, it is clearly mentioned that the Appellant (M/s Inox Air Products Private Limited) has entered into a job work agreement with M/s Esssar, Further in the said ruling at Para 2.3, it has been mentioned that the Appellant raised a daily invoice for the fixed and variable job work charges for each product, based on the the quantum cleared on that day. The AAR, Gujarat has given the judgment in favour of the Appellant (M/s Inox Air Products Private Limited) as there is a job work agreement and invoice was raised on job work charges. This fact was clearly mentioned under Para 15.3 of the judgment which is reproduced below;-

"Further, the computation of Job Work Charges has been described at clause 6 of the agreement entered in to between the Appellant and M/s. Essar. The Job Work charge agreed by the Appellant and M/s. Essar is the sole consideration payable by M/s Essar to the Appellant for the agreed activity to be carried out by the Appellant ..."

6.10 In the instant case, the Appellant has never been able to produce any job work agreement and invoices reflecting job work and its charges thereof, the case cited above is not fit or applicable.

6.11 We have also gone through the case of Kerala Authority for Advance Ruling in the case of M/s Bharat Petroleum Corporation Ltd {2018 (19) GSTL 119 (AAR-GST) Kerala. In the said ruling, it is clearly mentioned that:-

"The Appellant proposed to execute job work agreement with M/s. Prodair Air Products Pvt Ltd for processing and producing the industrial gases using the inputs provided the Appellant and send back the processed industrial gas to the Appellant."

6.12 Further under Para no. 5 of the said order, job work charges have been clearly mentioned and the observations of the Advance Ruling Authority, Kerala is reproduced for reference:-

"These inputs subject to particular process by the job worker and converted in to principal. If is settled position of law that job work is an activity which may or may not tantamount to manufacture. A job worker may undertake manufacturing of goods on account of others from the inputs supplied to him free of cost, and realize job work charges on return of the goods so manufactured or processed. In such a scenario the job worker alone has the liability to pay tax on the job work charges realized."

6.13 In this case also, the Advance Ruling Authority Kerala has pronounced the judgment in favour of the party (M/s Bharat Petroleum Corporation Ltd) as there was a clear "job work agreement" and "job work charges" mentioned separately in invoices. Therefore the subsequent judgment is not applicable in the instant case, as the facts of the Appellant's case are not exactly similar to the above cases.

6.14 The Appellant admittedly submitted that as per agreement, M/s Praxair is raising 6 (six) invoices each month for services rendered to the Appellant as follows:-

(i) two for fixed lease charges,

(ii) two for fixed operation & maintenance charges and

(iii) two for variable operation & maintenance charges at the rate of 18%.

6.15 After going through the sample invoices submitted by the Appellant, it is amply clear that the job work charges are not mentioned in the invoices raised to the Appellant for the service rendered, During the Personal Hearing, we put this question to the authorized representatives again and again, but the authorized representatives could not clarify the said deficiency properly nor could they produce any agreement or part of the agreement clearly explaining about the job work charges in the invoice.

6.16 We have also under gone the legal part of the Job work. As per Section 2(68) of CGST Act, 2017 read with section 143 of CGST Act, 2017 defines the meaning of the term 'job work' and explains 'Job Work procedure'. However, on this procedural part as defined under the said provision, Advance Ruling Authority, Odisha has not raised any questions on the subject issue; But the Advance Ruling Authority, Odisha has objected that in addition to the procedural part, there should be specific "job work agreement" and "job work charges" should be clearly mentioned and raised in their invoices.

6.17 Therefore, It is our considered view that the activities undertaken in the Appellant 's premises or production plant do not qualify for 'Job Work' under section 2(68) of the Central Goods and Service Tax Act, 2017 (CGST Act). In light of the above, we are of the opinion that the Ruling of the Advance Ruling Authority, Odisha, is in tune with legal provisions of the Act and it needs no interference. Therefore, we uphold the decision of the Advance Ruling Authority, Odisha,

ORDER

We, hereby, confirm and uphold the order of the Odisha, Advance Ruling Authority, issued vide order No.03/ ODISHA-AAR/2021-22/, dated 15-12-2021, and disallows the appeal of the Appellant i.e. M/s Indian Oil Corporation Limited, Paradip Refinery, Jagatsinghpur, Odisha.

(Sushil Kumar Lohani)	(Suresh Kishnani)
Member	Member