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CA Final · Indirect Tax Laws · Job Work

Orion Machines Ltd. sent a capital good (a CNC machine) to a job worker on 1 July 2022 without payment of tax. Neither return nor supply from the job worker's premises has happened. Orion obtained no extension from the Commissioner. Orion also sent inputs on 1 July 2022 to the same job worker, which were returned on 1 June 2023. Which is the correct position as on 1 August 2025?

The machine is deemed supplied on 1 July 2022, the day it was sent out, because it was not received back within three years. The inputs were returned within one year, so no deemed supply arises for them. The deemed supply is dated from dispatch, not from the expiry of the period.

  1. ABoth the machine and the inputs are deemed supplied on 1 July 2022
  2. BThe machine is deemed supplied on 1 July 2022; the inputs were returned within one year, so no deemed supply arises for themCorrect
  3. CThe machine is deemed supplied on 1 July 2025, when the three years ended; inputs need no action
  4. DNeither is deemed supplied, as deemed supply applies only where the job worker is unregistered

Explanation

Capital goods other than moulds, dies, jigs, fixtures and tools must return within three years, i.e. by 1 July 2025. Not received back, they are deemed supplied on the day they were sent out, 1 July 2022. The inputs came back on 1 June 2023, within one year, so no deemed supply arises. The third option wrongly fixes the date at expiry rather than the dispatch date.

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