Excise under Works Contract Tax

[vipul DODIA]

Dear All,

We are involved in fabrication of Doors and Windows in Aluminum, our purchase like Aluminum and Glass are normally excise paid purchases from principal suppliers.

Our clients are mostly builders and developers.

We get orders in form of Works Contract with tax structures of 5 percent MVAT on total value + 7.416 percent Service Tax on total Value.

As on today we are not availing any benefit of Cenvat credit / Service tax paid on Input services from sub contractors / processors.

Following are my queries :-

1] I would like to understand do  Excise play any role if my sales crosses over 1.5 cr under work contract with above tax structure?

2] Can we avail any input service tax credit with above tax structure ?

I would be very thankful to you all if I can get proper answer backed with govt. documents and rules.

Thanking You in advance.

Vipul Dodia

[Rajesh Nathoo]

Dear Mr. Vipul,1. U are not doing any manufacturing activity , it is well settled in law , fabrication and assembling at site is not manufacture . You are not liable to pay Excise Duty even when ur turnover crosses 1.5 Cr.2. Yes u can avai service tax credit .

[Madhukar N Hiregange]

The CET would classify these as fabrication which could be done at a shed away from the site where other activities are carried out or at site. If at site one has the exemption. However if done elsewhere and removed to site then the levy could be fastened if the value o such clearances - Cost of Production + 10 percent exceeds Rs. 150 lakhs. If it exceeds then over and above 150 L cenvat credit also would be available.

ST input services credit + capital goods used in provding the services would be eligible. Please read several articles on this site as well as others on cenvat credit for more clarity.

[vipul DODIA]

Dear Mr. Madhukar,

I would be making windows ( ie cutting section as per sizes at my factory and would supply material at site) in this case do I need to pay excise duty and avail cenvat credit or is it ok if we don't take any cenvat credit and don't register ourselves under excise.

As of we are paying 7.416 percent service tax on total value and availing and credit.

Regards

Vipul Dodia

[Madhukar N Hiregange]

If you are merely cutting to size and sending to site no manufacture. However if the frames are welded etc then it could be manufacture. Then the value of the material would have to be considered for 150 L limit.

The payment of service tax is for the subsequent activity of construction/ installation which doe snot make any difference to CE. You may examine whether you should be paying 12.36 percent x40 percent as it appears that what you are doing is original works.

[Guest]

I can answer for your second Question only.

You can avail a input service tax credit.

AI Summary

Excise liability for fabrication under works contract: on site assembly is not manufacture; offsite fabrication may trigger excise, credit possible. Excise liability depends on whether fabrication constitutes manufacture or mere on site assembly: on site assembly or cutting to size is non manufacture and not subject to excise, whereas off site fabrication followed by removal to site may be treated as manufacture and tested against the turnover threshold for excise and cenvat credit eligibility. Input service tax credit is available for service tax paid and for capital goods/services used in providing taxable services.