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 Goods which 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 process as 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 be only availed 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

Pankaj Gupta

M-09212401641

AI Summary

Service tax exemption for job work on capital goods questioned; exemption unlikely if coating isn't manufacturing.
Whether Notification 25/2012-S.T. Sl. No. 30(c) applies when job work (tin/zinc coating) is performed on capital goods used in manufacturing but not incorporated in finished goods. Applicability depends on (i) whether the job-worked item is a good on which the principal manufacturer pays appropriate duty after job work, and (ii) whether the coating operation is treated as part of the manufacturing process rather than a taxable service. Divergent opinions and authorities mean cautious reliance on Cenvat credit is recommended where coating is not clearly part of manufacture.