Applicable of Serviec tax on jobwork.

[Guest]

Dear Sir,

We are a manufacturer and we send the partial processed inputs to our job worker under Cenvat credit Rule 4 (5)(a). the job worker has added some his won material like color for paint our material.

(In short we send the plastic plates and job worker paint this plastic article with different colors as per aou requirement ans return to us ) In this above case if the job worker had registered in Central Excise and service tax than which tax is applicable in this transaction. whether is attract for service tax or Excise Duty.

If service tax is applicable than under partial reverse charge mechanism we also liable to pay service tax as per reverse charge mechanism if the job worker is a proprietor firm ?

Regards

Swapneswar Muduli

[Rajagopalan Ranganathan]

Sir,

Notification 30/2012-ST dated 20.6.2012 as amended (with effect from 1.7.2012) does not specify that in respect of services received from job worker the service tax is to be paid on reverse charge mechanism and does not indicate the ratio in which the said service tax is paid. In respect of job work, if the job work done by the job worker amounts to 'manufacture' under Section 2 (f) of Central Excise Act, 1944, then it is not chargeable to service tax. As your narration you are sending plastic plates to job worker for painting with various colours. This does not in any way bring any change in use, character etc of the plastic plates. Hence the job work of painting is a service and is liable to service tax. 100% of service tax is to be paid by the job worker and not by you. the service tax paid by the job worker can be taken as credit provided you pay duty on the final product for the manufacture of which said plastic plates are used.

[Mahir S]

Sir.

If colour is part and parcel fpr the manufacture of plastic plates without which the manufacturing process is not complete and without which such plates cannot be differentiated and differently identified, then such process shall amount to manufacture. However, it being a job work process therefore excise duty shall not be applicable thereon.

Hence, whether such process falls under excise or service tax has be decided by you based on the complete process of manufacture of plates.

[Guest]

Dear Sir,

Thanks for your reply, But as per notification No-25/2012 if Job work done under cenvat provision then it is exempt from Excise as well as service tax.is it correct ?

I read it from a service tax ready Reckoner.So i confused about this whether it is exempt or not ?

[KASTURI SETHI]

In this context, I want to add that the processes of painting (including spray painting) and also Powder Coating does not amount to manufacture.

[Rajagopalan Ranganathan]

Sir,

If a manufacturer sends his inputs or partially processed inputs to a job worker under Notification No. 214/86-CE for further processing testing etc, then the job worker can return to the principal without payment of duty such inputs/partially processed inputs after subjecting the same to required process. When this Notification was issued there was not service tax. However, since service tax is leviable on process undertaken, if it does not amount to manufacture service tax payable. However, according to Sl. No. 30 (c) of Notification No. 25/2012-ST dated 20.6.2012 as amended (with effect from 1.7.2012) any goods excluding alcoholic liquors for human consumption, on which appropriate duty is payable by the principal manufacturer is exempted from payment of service tax. In view of this no service tax is payable if any process is applied to inputs/partially processed inputs on job work basis.

[KASTURI SETHI]

I fully agree with both the replies dated 18.10.2015 and 19.10.2015 of Sh.Rajagopalan Rangnathan.

[Guest]

Dear Sir,

Thanks for your valuable reply.

I am fully agree with you .

[Mahir S]

1) Yes sir, since duty is paid by you on the finished goods, therefore, there is no any excise or service tax liability on your company in respect of the job work undertaken by you. In this regard, the Reply dated 19.10.2015 furnished by Rajagopalan Ranganathan Sir is also proper.

2). Sir, the replies dated 18.10.2015 and 19.10.2015 by Rajagopalan Ranganathan Sir have different view points, so one cannot fully agree to both the said replies as replied and agreed above; therefore you have to choose and take stand to either one of reply.

[Guest]

Dear Mahir Sir,

I am agree the reply by Rajagopalan Ranganathan Sir on 19.10.2015.

[KASTURI SETHI]

Sh.Rajagopalan Ranganathan has beautifully explained both aspects of the issue. How to follow and which aspect to follow depends upon the facts and situation of each case.

[Mahir S]

Thanks a lot , Sir .

AI Summary

Service tax on jobwork painting hinges on whether the process amounts to manufacture; exemption may apply under job work rules. Whether painting by a job worker is subject to service tax or treated as manufacture depends on whether the process alters the character or identity of partially processed plates; if it does not, the painting is a taxable service payable by the job worker and eligible for credit by the principal when duty is paid on the finished goods. Notification No. 25/2012-ST may exempt service tax where appropriate duty is payable by the principal manufacturer, so application of the notifications and factual assessment of the manufacturing process determines levy and liability.