GOODS UNDER RULE 4(5) (a)

[Ramakant Tidke]

Sir

we received 10 MT powder with challan of rule 4(5) (a) for Job work and the packing of the same is paper bag, We will add the water on it and mix the same at our mixer . No chemical process is there, only mixing . but due to add of water and mixing of the same ,this material become in paste ( semi Liquid) form and will pack in plastic container and after the mixing process , the weight will be 20 MT

our plastic container is excisable goods

Please advise how we will send this material to our customer

[Rajagopalan Ranganathan]

Sir,

The process undertaken by you results in physical change, that is, powder form to paste form. Hence there is no change character or use. hence the process does not amount to manufacture and no excise duty is leviable on the same. In view of this position you cannot avail credit of duty paid on plastic container since your final product is not dutiable. The entire cost of the container including duty will be added to the cost of the final product.

[Mahir S]

Sir,

you may return the paste on the job work challan if the party supply you goods for job work is registered with excise, else you have to pay service tax thereon.

If the party for whom you have carried out job work is registered with excise and paying duty on their finished goods, then you may avail cenvat credit for the plastic container.

AI Summary

Physical change versus manufacture: converting powder to paste is not manufacture and prevents cenvat credit for containers. Converting powder to paste by adding water and mixing effects only a physical change and does not constitute manufacture; therefore the resultant paste is not dutiable and excise duty is not leviable. Duty paid on plastic containers used for packaging cannot be availed as cenvat credit and must be included in the cost of the final product. Return of material on job work challan and entitlement to cenvat credit depends on the excise registration and duty position of the principal; absence of principal registration may attract service tax implications.