Service tax on Jobwork of Capital Goods Not. 25/2012

[PANKAJ GUPTA]

Dear Sir,

We are manufacturing automobile Gears & Shafts falling under chapter 8483, 8708 & 8714 of the first schedule to the central excise tariff act, 1985 and paying appropriate excise duty on the removal of our finished goods. We are using Cutting/ Hobbing tools as Capital Goodswhich used in our machines for cutting/ hobbing operation on our final product (Gears & Shafts) which is part of manufacturing process of our finished goods. We are getting job work operation called Tin/Zink Coating operation under rule 4(5)(a) from the outside job worker on such tools for increase life of tools. Job worker is charging Service tax on their job work invoice and we are taking Cenvat Credit on such bills.

We wish to take benefit of Service tax exemption Notification no.25/2012 under point no. 30(c) for not charge service tax by job worker on their job work bills.

Notification are as under :

Central Government hereby exempts the following taxable services from the whole of the service tax leviable thereon under section 66B of the said Act

30.Carrying out an intermediate production processas job work in relation to –

(c) any goods on which appropriate duty is payable by the principal manufacturer; or

Please give your expert opinion in respect of below :

1. Can we avail benefit of above notification by considering that we are paying excise duty on our final product (different product) but we are getting Job work operation on capital goods (another product) which has not fitted in our final product/not part of our final product and used only in manufacturing process i.e. cutting/hobbing of final product.

2. Whether Exemption can beonlyavailed if duty is pay by manufacturer on the same goods on which Job work done by job worker.

3. Carrying out an intermediate production process- Whether Job work operation on capital goods will be treat as Carrying out an intermediate production process.

Regards

PankajGupta

M-09212401641

[Rajagopalan Ranganathan]

Sir,

As Sl. No. 30 (c) of Notification 25/2012-ST dated 20.06.2012 as amended (came into effect on 01.07.2012) states that "carrying out an intermediate production process as job work in relation to any goods excluding alcoholic liquors for human consumption on which appropriate duty is payable by the principal manufacturer, in my opinion it will be safe not to claim this exemption in respect of capital goods (parts of your machinery). Since you can avail the service tax paid by the job worker as credit you are not losing any thing. Therefore it is my advice that you need not claim the said exemption and by claiming it you will only invite unnecessary audit objection and or litigation. It will result only in using your energy in pursuing fruitless exercise.

[NEERAJ KUMAR, RANCHI]

The question is whether tin/zinc coating a manufacturing activity or not? who is paying excise duty on Cutting/ Hobbing tools after zinc coating... ? if the answer is in negative service tax exemption is not available otherwise it is ...

[YAGAY andSUN]

Dear Pankaj,

It is settled legal position that coating is not manufacturing. Kunal processors v CCE 2001 (133) ELT 653 (CEGAT), = 2001 (3) TMI 508 - CEGAT, NEW DELHI,Sitapur plywood v CCE 1990 (107) ELT 637= 1999 (1) TMI 98 - CEGAT, NEW DELHI. Hence, service tax would be liable.

Kind attn: - Neeraj Sir, Welcome back. After such a long time, you are replying. Good to meet you once again on TMI.

Regards,

YAGAY and SUN

(Management, Business & Indirect Tax Consultants)

[Mahir S]

SIR,

PLEASE refer to the following points on the issue :-

(i) Case Law of ENDURANCE SYSTEMS INDIA PVT LTD Versus COMMISSIONER OF CENTRAL EXCISE AND CUSTOMS (2014 (2) TMI 99 - CESTAT MUMBAI) :-

Business Auxiliary Service - Job Work - Activity of powder coating and chrome plating for various motor vehicle parts received from the manufacture on job works basis - Held that:- Appellants are undertaking the activity of powder coating and chrome plating for various motor vehicle parts and was working notification No.214/86-CE. The appellants are receiving the motor vehicle parts from principle manufacturer and after undertaking the activity of powder coating cleared to the principal manufacturer and the same goods are used in the manufacture of excisable goods cleared on payment of duty. As the processes undertaken by the appellant amounts to manufacture as per the decision relied upon by the appellant as the same is part of manufacturing process. Therefore, we find that appellants are not liable to pay service tax under the category of Business Auxiliary Service - Decided in favour of assessee.

[NEERAJ KUMAR, RANCHI]

Thanks Mr Khatri , thanks a lot ... YAGAY and SUN

AI Summary

Manufacturing Company Seeks Service Tax Exemption on Job Work for Capital Goods Under Notification 25/2012; Exemption Unlikely A manufacturing company producing automobile gears and shafts inquires about service tax exemption under Notification 25/2012 for job work performed on capital goods used in their production process. They seek to understand if the exemption applies when the job work is performed on capital goods, not directly part of the final product. Responses suggest that claiming the exemption may not be advisable, as the job work on capital goods like coating does not qualify as manufacturing, and service tax credits can be availed instead. Legal precedents indicate that coating is not considered manufacturing, thus service tax should be applicable.