Opinion on CE / ST

[RAJAVARAPU NAGESWARRAO]

Dated 11^th April 2015.

To

The Consultant / Advisor,

Dear Sir,

SUB: CE and ST - Opinion on Supply of plastic containers 1 ltr / 5 ltr and more capacity (oil packing material) to OIL Refilers / Edible Oil Companies - Reg.

1. We wish to bring your notice that we are manufacturer of Plastic Edible Oil packing material under 39 CE Chapter. As per Chapter / Act our product are liable to pay ED @ 12.5%.
2. One of our major customers (Edible oil refilers) required above subject material from our company.
3. Now, the customer provides raw-material (like PP Granules, labels etc.,) supplied under job work procedure to our Unit under job work chalan.
4. Our Unit would be manufactured on the above oil packing material under job work procedure (usage of molding machines, man power, electrical power and mould also by our Unit). The customer has been paid job work charges on piece rate basis.
5. In this context please give your valuable opinion which activity applicable on this issue under Central Excise and Service Tax (a) Manufacturing activity OR Job Work Activity.
6. If the activity are in job work, shall we discharge Service tax on job work charges or not?
7. OR if the activity is covered under manufacturing, shall we discharge duty on job work charges?
8. Please give your valuable written opinion on the above subject issue at the earliest. FYI

Regards,

R Nageswar Rao,

[MUKUND THAKKAR]

Sir,

In case of Raw material provide by your customer under job work challan and final product is excisable in such situation, you had charged the job work charges and pay excise duty on labour charges.such type of activity following under the sub contracting. you need not pay the service tax. only pay excise duty on labour charges as per sub contracting. other hand if raised the bills of labor charges no VAT is applicable. so as per my view you go for paying excise duty which has the right option.

[Rajagopalan Ranganathan]

Sir,

With due respects to views of Shri. Mukund Thakkar, my view is as follows: -

1. Whether oil refilers/Edible oil companies transfer the credit of duty paid on P P granules and labels through separate invoices in addition to job work challan?

2. The process undertaken by you will amount to manufacture as per Section 2 (f) of Central Excise Act, 1944 since the container is a different from PP granules. Therefore you have to pay duty on the containers. However duty paid by you can be availed as credit under CENVAT Credit Rules, 2004 by Refilers/Edible oil companies.

3. Since the process undertaken by you amount to manufacture it is excluded from the definition of service and hence you need not pay any service tax on your activity.

[VVFINDIA Taloja]

Dear RAJAVARAPU NAGESWAR RAO,

Rajagopalan Sir has rightly advised. There is an opportunity to take CENVAT credit on the PP Granules in case it is directly supplied to you for manufacturing such containers. Since the manufacturing activities carried by you is the final, you have to pay the central excise duty on the job work processing charges and principle manufacture can take the credit.

AI Summary

Plastic Container Production Classified as Manufacturing Under Central Excise; Excise Duty Applicable, Not Service Tax A manufacturer of plastic containers for edible oil sought advice on whether their activities should be classified as manufacturing or job work under Central Excise and Service Tax regulations. They receive raw materials from customers and perform manufacturing using their resources. Responses from advisors suggested that since the process results in a new product, it qualifies as manufacturing under the Central Excise Act, necessitating the payment of excise duty. Service tax is not applicable as the activity is considered manufacturing. Additionally, CENVAT credit may be available for the duty paid on raw materials.