Cenvat Credit availed in respect of Job Work undertaken

[Emco Ltd.]

Dear All Experts,

We are manufacturer of excisable product. Now, we want start Job work from other excisable Manufacturer due to utilization of spare capacity of Unit.

My query is as under.

1. Principal Manufacture cleared their goods on payment of duty then Service tax is applicable on Job work goods or otherwise ?

2. If we are consuming Excisable Input material during the Job work activity then whether we should reversed excise duty on consumed material or otherwise ?

3. We have also referred 2005(183) E.L.T. 353 (Tri. LB) Sterlite Industries Ltd. V/s Commissioner of Central Excise - Pune and 2009= 2004 (12) TMI 108 - CESTAT, MUMBAI (244) E.L.T. 337 (Bombay High Court) = 2009 (11) TMI 111 - BOMBAY HIGH COURT judgment of Tata Motors Ltd V/s union of India, both judgment reflected that Cenvat Credit does not required to be reversed on job work material undertaken.

Kindly enlighten the above issue.

Regards

For, Emco Limtied

Amit Parmar

[MUKUND THAKKAR]

1. Principal Manufacture cleared their goods on payment of duty then Service tax is applicable on Job work goods or otherwise ?

No, if principal Manufacture and cleared their goods with the payment of excise duty than service tax is not applicable to you. just you have to pay excise duty on your job work charges bills.

2. If we are consuming Excisable Input material during the Job work activity then whether we should reversed excise duty on consumed material or otherwise ?

if your estimated cost of input is covered under your job work charges than need to pay excise duty.

[Emco Ltd.]

Dear Sir,

Thanks for reply.

In the 1st query, you have mentioned that we have paid Excise Duty on Job work charges Invoice.

The Principal Manufacturer send us the Material through Annexure-II under Rules 4(5a) of Cenvat Credit Rules. And Under Rules 4(5A) excise is exempted. Whether it is right or otherwise ?

What about your opinion in regards to Judgment of High Court in regards to Cenvat Credit reversal point.

Regards

Amit Parmar

[Mahir S]

1) If the Principal Manufacturer clears their goods on payment of duty, then Service tax is not applicable on Job work goods.

2) If you are consuming Excisable Input material during the Job work activity, howevver if the Principal manufacturer is further carrying out processes on the said goods and thereafter clearing the same on payment of duty, then you should not reverse the excise duty on the consumed material.

AI Summary

Cenvat credit for job work: no service tax if principal paid excise; duty due on job-work charges if applicable. If the principal has cleared goods on payment of excise duty, the job worker is not liable to service tax; excise duty liability arises on job-work charges when those charges amount to an excisable transaction, and consumption of excisable inputs may give rise to duty consequences if input costs are included in job-work charges, while Cenvat reversal may not be required where the principal further processes and clears the goods on payment of duty as reflected in the cited authorities.