CENVAT CREDIT / TAX LIABILITY

[puneet virmani]

INDIAN COMPANY SUBSIDIARY OF INTERNATIONAL COMPANY, IMPORTS CERTAIN GOODS FROM PARENT COMPANY FOR JOBBING PURPOSES, DO THE JOB MACHINERY WORK HERE IN INDIA AND RESEND THE GOODS TO INDONESIA FOR SALE THERE. NO IMPORT DUTY IS BEING PAYABLE AS FOR JOBBING IMPORT AND THEN EXPORT AFTER JOB WORK, TAKEN LICENSE FROM CUSTOMS FOR CONCESSIONAL RATE OF DUTY FOR THE SAME. WHETHER ANY EXCISE OR SERVICE TAX LIABILITY ARISES ON CHARGES TAKEN FROM THE PARENT COMPANY AS LABOUR SERVICE CHARGES. WHETHER CENVAT AVAILABLE OF THE INPUT SERVICES USED IN SAID JOB WORK.

[Rajagopalan Ranganathan]

Sir,

Since you are receiving the machinery from your holding company for performing job work on the same and export the same as per instruction of the holding company no excise duty is payable by you since you are exporting the job worked machinery outside India. However, it will attract service tax if the job work done by you does not amount to manufacture as per Section 2 (f) of Central Excise Act, 1944. Since you are exporting the job worked machine to a place outside India you are also exempted from Service tax.

Regarding CENVAT credit of duty paid on inputs, capital goods and service tax paid on input services, you are eligible to take the same if the job work done by you amounts manufacture as per the provisions mentioned above. If the job work done by you does not amount to manufacture then you are not eligible to avail the credit. However, since you are exporting the job worked machine you can claim refund of such credit under rule 5 of CENVAT Credit Rules, 2004. This is my opinion.

AI Summary

Cenvat credit eligibility depends on whether job work amounts to manufacture; exports affect service tax and refund rights.
Export of job worked goods prevents imposition of excise duty; service tax applies only if the job work does not amount to manufacture, though exports exempt the service. Cenvat credit on inputs, capital goods and input services is available when the job work qualifies as manufacture; otherwise credit cannot be availed but may be claimed as a refund under the Cenvat Credit Rules for exported job worked goods.