Serive Tax

[JITENDER THAREJA]

BASICALLY WE HAVE A EXCISE UNIT AND WE ARE ALSO PAYABLE OF SERVICE TAX. IF SOMEONE COMPANY APPROACHED US FOR THE MACHININGOF THEIR CASTING FROM US. THAN WHAT WILL THE PROCEDURE TO PAY THE SERVICE TAX.

[PAWAN KUMAR]

Dear Sir,

As per my view, If the principal company who supply their casting to you under cover of job work challan under rule 4(5)(a) of Cenvat Credit Rules, 2004, and you do machining activity on such casting and return the machined casting, No need to pay service tax on such machining charges if the principal uses such machined casting into his final products. Your activity of machining should not be manufacturing activity in such case.

[JITENDER THAREJA]

DEAR SIR THNAKS BUT,

A TRACTOR MANUFACTURING CO. HAS APPROACHED US FOR THE MACHINING OF THEIR CASTING FROM US. WHICH IS SITUATED AT EXCISE FREE ZONE HIMACHAL PRADESH AND OUR UNIT COVERED UNDER EXCISE and SERVICE TAX RULES IN HARYANA.THEY SENT US METERIAL ON CHALLAN BASIS FOR JOB WORK .BUT WHAT WILL THE SERVICE TAX PROCEDURE .( MY MEANS SERVICE TAX WILL BE PAYABLE ON JOB WORK VALUE OR JOB WORK + METERIAL VALUE.)

[Mahir S]

Sir,

In your case, you need to raise the service tax bill only on Labour charges i.e. on the Job work value.

[PAWAN KUMAR]

Dear Sir,

As per my view, if the activity is not amount to manufacture and appropriate duty is paid by the principal on the excisable final products, job worker will not liable for service tax on job work charges. but if the excisable final products are exempt from the duty of excise, job worker is liable for service tax on job work charges.

[YAGAY and SUN]

Dear All,

It is settled legal position casting becomes finished goods when machined. Please check para 8.4.2 of the Central Excise Law and Practice authored by Mr. V.S.Datey.

Regards,

Neelam Taneja - Executive Consultant

(YAGAY and SUN - Management, Business and Indirect Tax Consultants)

AI Summary

Service tax on job work: taxable on labour charges unless activity amounts to manufacture or product is excise-exempt.
Service tax on machining supplied as job work turns on whether the activity amounts to manufacture and on excise treatment of the principal's final product. If machining is non-manufacturing processing and the principal returns machined castings into excisable final products with duty paid, the job-worker need not pay service tax on job-work charges. If machining produces finished goods amounting to manufacture, or the principal's final products are excise-exempt, the job-worker's service charges become liable to service tax.