Service tax on Tools and Dies

[varun arora]

Dear Experts,

If I manufactures the tools and dies on customised basis, suppose My customer provides me the drawing and specification of tools and I procures raw material at my end and manufactures the tools and dies.

And My customer will approve the Dies after testing process and modification, if required.

Please suggest me whether this is a Works Contract and chargeable to Service tax OR covered under Central Excise as under Manufacturing Activity??

Thanks in Advance.

[Rajagopalan Ranganathan]

Sir,

The activity undertaken by you amounts to 'manufacture under Section 2 (f) of Central Excise Act, 1944 and hence you have to pay excise duty under Section 3 of the above Act read with the schedule to Central Excise Tariff Act, 1985. Moreover you have to add value of drawing supplied by your customer in the transaction value of the tools manufactured by you.

[KASTURI SETHI]

Tools and dies are excisable goods falling under Chapter 82 (8207) of Central Excise Tariff Act, 1985. The manufacture of these goods will attract Central Excise duty. Conditional exemption is available to some goods of Chapter 82 under General Exemption No.50 vide Notification No.12/2012-CE dated 17.3.2012 as amended. Small Scale Exemption is also available under General Exemption No. 1 vide Notification No. 8/2003-CE dated 1.3.2003 as amended.

[Mahir S]

Yes the views provided above by Shri Rajagopalan Ranganathan is correct.

Further, you have to get a chartered certificate regarding the valuation of the tools and dies and amortize such value at the time of clearance of finished goods manufactured from such tools and dies.

If you have issue invoice under modification or tool development Charges then you are liable to pay service tax.

[KASTURI SETHI]

I endorse the views of Sh. Rajagopalan Ranganathan and Sh.Mahir S. expressed in their reply dated 12.10.2015. However, here it is pertinent to mention that sometimes the assessees do not disclose the complete facts. Thus fool proof guidance is possible only with the examination of the records.

[varun arora]

Thank you all Experts.

AI Summary

Manufacture of tools and dies treated as excisable manufacture, attracting excise duty; invoiced development charges may attract service tax.
Manufacture of customer specified tools and dies is treated as manufacture for excise and the goods are excisable under Chapter 82; the transaction value must include the value of drawings supplied by the customer. A professional valuation certificate should be obtained and such value amortized on clearance of finished goods. Conditional exemptions under general exemption notifications and small scale exemption may apply. If charges are invoiced as modification or tool development fees they may attract service tax, and factual record examination is required to determine tax character.