Job work service

[Gopal B]

Dear Sir,

We are sending material to a job worker on job work challan, after completion of Jobwork we are getting back our material.The Job worker returned the challan and also raising Excise Invoice showing Excise duty.Is this system is right or wrong ? Pls clarify.

Thanking u.

[ashish chaudhary]

If activity undertaken by him amount to manufacturing, he has to charge excise duty. Otherwise, you may follow job work route where he is not required to charge duty based on your undertaking that duty will be paid finally by you on clearance of goods from the factory.

[Guest]

Dear Sir,

if material consumed by them(jobworker) i.e plating to material and consume Chemical and jobworker as well as Manufacturer are aviled Cenvat credit please clear me Excise duty applicabe on same or not.

[Rajagopalan Ranganathan]

Sir,

If the process undertaken by the job worker does not amount to manufacture under Section 2 (f) of Central Excise Act, 1944, then he may simply return the inputs after processing without payment of duty under the cover of the challan originally received. If the process undertaken by the job worker amounts manufacture then he will pay duty and issue an excisable invoice. The duty paid by the job worker is available as credit to the principal manufacturer.

After introduction of Finance Act, 1994 if the process undertaken by the job worker does not amount to manufacture he is considered to provide a service and the same is chargeable to service tax. In this case also he will issue an invoice under Service Tax Rules, 1994 and the principal manufacturer is eligible to take credit of the service tax paid by the job worker. However, Sl. No. 30 (c) of Notification No. 25/2012-ST dated 20.6.2012 as amended (with effect from 1.7.2012) stipulated that 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. That is if the principal manufacture uses the job worked goods in the manufacture of final product and pay duty on the same then the job worker is exempted from payment of service tax.

[Mahir S]

Mr Rao,

If you are not paying excise duty on the finished goods which were initially sent for job work, then raising of excise invoice showing excise duty by the job worker is correct.

[Mahir S]

Mr Singh,

Your query is not complete. However, still i shall try to answer to it.

If duty is paid by manufacturer for job work clearances from cenvat credit account, then job worker can avail such cenvat credit. Further, job worker can also clear the job worked goods on payment of duty to the manufacturer who can thereafter avail cenvat credit thereon.

[Guest]

Dear Sirs,

My query is that if we are manufacturer and doing also jobwork to our sister concern i.e. plating & Powder coating if we are availed cenvat credit on Chemicals. Please suggest us we are pass on excise duty which material consumed on jobwork.

thanks

[ashish chaudhary]

Mr. Prabhakar,

You are required to charge excise duty on the goods manufactured by you as principal manufacturer. In respect of job worker (presuming process undertaken is manufacturing), you may follow Notification No. 214/86 as per which you need not to pay excise duty if ultimately paid by sister concern to whom goods supplied by you.

You may take credit on inputs which have been used in the manufacture of goods supplied on job work. This credit may be utilised on payment of other output liability. Refer judgment of Sterlite Indus. (I) Ltd. v. Commissioner - 2005 (183) E.L.T. 353 (Tribunal-LB) = 2004 (12) TMI 108 - CESTAT, MUMBAI

AI Summary

Job work tax treatment: manufacturing processes attract excise duty while non-manufacturing work may attract service tax with credit implications. Whether a job worker must charge tax depends on whether the process constitutes manufacture; if so, the job worker pays excise duty and issues an excisable invoice with the duty available as credit to the principal. If not manufacture, the job worker may return inputs under the original challan without excise duty but the activity may attract service tax, and specified exemptions relieve service tax where the principal pays the final duty. Notification provisions also allow duty/payment arrangements between related parties and affect CENVAT credit entitlement.