Paid Service tax adjust to payable Service tax

[Raja krishnan]

Sir,

Our client is a manufacturer and they have already paid their Service tax for some of Rupees to their Franchise Service as well as they have done some job work to somebody, and now the doubt is,

1) job work is applicable to service tax?

2) if yes they will adjust from the above paid service tax which is paid by their Franchise Service for the payable service tax for job work ?

Please clarify the aforesaid our request.

[Rajagopalan Ranganathan]

Sir,

               Job work will be treated as service unless it  amounts to manufacture under Section 2 (f) of Central Excise Act, 1944.

             Under Rule (4 A)of Service Tax Rules1994 where an assessee has paid to the credit of Central Government any amount in excess of the amount required to be paid towards service tax liability for a month or quarter, as the case may be, the assessee may adjust such excess amount paid by him against his service tax liability for the succeeding month or quarter, as the case may be. However, under Rule 4B of Service Tax Rules, 1994 the adjustment of excess amount paid, under sub-rule (4 A), shall be subject to the condition that the excess amount paid is on account of reasons not involving interpretation of law, taxability, classification, valuation or applicability of any exemption notification.

         Therefore you cannot adjust excess service tax paid on franchise service towards payment of service tax payable on the job work done by  you since you have not at all paid service tax on the job work done by you and moreover you are entertaining a doubt whether job work done by you amounts to manufacture or service which is question of interpretation.

[YAGAY andSUN]

, Dear Raja,

You may seek refund against the excess paid service tax under Section 11B of the C.E. Act as made applicable to Service Tax under Section 83 of the Finance Act,1994 as amended from time to time.

Regards,

Team YAGAY & SUN

(Management & Indirect Tax Consultants)

[Madhukar N Hiregange]

Job work which is not manufacture could be liable for service tax unless it is a part of process of manufacture of dutiable goods sent by manufacturers.

Credit of the franchisee or any other service can be used as there is no one to one co-relation under Cenvat credit. It is like basket- eligible credits are put in the basket and when required for payment of central excise duty or service tax used.

AI Summary

Job work as service: excess service tax cannot be adjusted when taxability is under interpretation; refund or cenvat options exist. Job work is treated as a service unless it amounts to manufacture. Excess service tax payments may be adjusted against subsequent liabilities, but adjustment is barred where the excess arises from questions of taxability, classification, valuation or exemption applicability; therefore excess paid on one service cannot be adjusted against disputed job work liability. Taxpayers may seek refund of excess payments or, where eligible, utilise pooled Cenvat credit for payment of service tax.