Re-Rubberising on roller

[Narendra Soni]

Dear Experts,

We sent roller for re work, the supplier gringing the roller and re-rubberising on the roller and sent back us. He charged VAT @5% on total bill amount, we deduct TDS u/s 194C. we received enquiry from service tax deptt.

Please advise whether any service tax is applicable?, whether we should not deduct TDS.

URGENT please.

[JSW CEMENTLIMITED]

TDS and SErvice Tax both are un-related as both are levied under different statutes. You have to determine if the process undertaken by Jobworker is amounting to manufacture or not. If it amounts to manufacture then NO Service tax would be leviable otherwise service tax would be leviable.

[Rajagopalan Ranganathan]

sir,

As per the judgment of CESTAT in ZENITH ROLLERS LTD. Versus COMMISSIONER OF CENTRAL EXCISE, NOIDA 2013 (12) TMI 620 - CESTAT NEW DELHI= [2014 (33) S.T.R. 678 (Tri. - Del.)] re-rubberisation of old, worn out rubberized rollers amount to processing of goods and re-rubberisation of rollers amount to re-conditioning of used rollers. This activity is equally classifiable under Business Auxiliary service and Management, Maintenance or Repair service. Hence service tax is payable.

[Narendra Soni]

Thanks experts,

What about works contract service introduced w.e.f.01.07.2012, Rubber is Material and lapping the rubber on roller is service.

[Vijay kumar]

The activity is works contract since it is a repair work involving both sale of goods and rendition of service. Please refer to the definition of Works Contract under SEction 65B of the Finance Act, 1994 which states as follows:

"works contract" means a contract wherein transfer of property in goods involved in the execution of such contract is leviable to tax as sale of goods and such contract is for the purpose of carrying out construction, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, alteration of any moveable or immovable property or for carrying out any other similar activity or a part thereof in relation to such property;

There is a contract (oral or written) and there is transfer of property in the form of rubber (used for re-rubbersing etc) and the goods in question are leviable to tax as sale of goods, since VAT is paid. Hence it is a works contract.

The material value should suffer VAT and service portion should suffer ST. As per Rule 2A of the Service Tax Valuation Rules, 2006, the service provider is liable to pay the tax by excluding the material value and if it is not possible to seggregate material value, he can pay ST on 70% of the gross value. However, if he is an individual/HUF/Partnership firm and yours is a body corporate, reverse charge mechanism applies under Nofn.30/2012-ST whereby each of you have to pay 50% of the tax.

Hence, service tax is applicable. TDS is a different matter for which you may refer Section 194C of the Income Tax Act, 1961. If TDS is also attracted, both are leviable. While ST is an indirect tax on the value of the activity, TDS is a direct tax on the profit / amount payable to the contractor or job worker.

[bhart b sharma]

the description provided by depicts that it tentamounts to job work and thus does not constitute 'manufacture' at all as no new product comes into being. service tax was definitely payable on it as no Excise Duty is leviable in such cases.

AI Summary

Service tax on re-rubberising: repair or works contract treatment determines VAT on materials and service tax on the service portion.
Re-rubberising a roller that amounts to repair, reconditioning or job work is not manufacture and is taxable as a service; if transfer of rubber is part of the contract, the transaction may be treated as a works contract with VAT on the material element and service tax on the service element. Valuation rules permit excluding material value or applying a presumptive service portion where segregation is impracticable. TDS obligations under income tax are separate and do not affect service tax liability.