Exemption - Services rendered to SEZ

[sunil mehta]

Dear Sir, A)A pvt. ltd.co.gets contract from another pub.ltd.co.(developer of 'Township' to manf. & supply 'Hollow Cement Blocks'at their Township Planning' site.They will supply the foll: i)Cement ii)construction water iii)construction electricity.iv)space at their township site B)The contractor will have to make provision of the foll:on itsw own. i)sand ii)aggregate iii)labour iv)dumper/tractor for shifting cement iv)Loading/unloading of cement etc. C)The contractor purchases materials (except cement)and sublets the work to 4 diff.sub-contractors for processing/conversion the materials/cement in to 'Hollow Blocks'.(i.e. application of labour on materials)The machines are supplied by contractor to sub-contractors. D)CONTRAT PRICE-The main co. will pay contractor for each piece manfuctured I(ncld.labour+sand+aggregate+profit margin) Query: 1)whether manf./prodn.of 'HOLLOW BLOCKS'amt.to 'manufacture' and thus escape ser.tax under Bus.Aux.?i.e whether hollow blocks of cement/sand come under excise tariff sch.? 2)If it is taxable then how the contract price will be bifurcated for finding value of taxable services ? 3)whether ser.tax is applicable to sub-cont.who does labour work only for contractor?whether ser.tax is applicable on pure labour work? 4)What will be the situation if whole work is carried out by contractor & sub-cont. in premises of SEZ for township development?i.e work is carried for SEZ developer in SEZ premises. 5)whether sub-contractor will be exempted if main services of contractor is exempted because of SEZ? Thanking you, sunil mehta

AI Summary

Hollow Cement Block Production Classified as Manufacturing: Subject to Excise Duty, Not Service Tax; SEZ and Subcontractor Implications Analyzed. A private limited company contracts with a public limited company to manufacture and supply hollow cement blocks at a township site. The contractor provides certain materials and sublets the work to subcontractors for processing. The main queries are whether the production of hollow blocks qualifies as manufacturing, thus exempting it from service tax, and how to bifurcate the contract price for taxable services. Additionally, it questions the applicability of service tax on subcontractors performing labor-only tasks and the implications if the work is conducted within a Special Economic Zone (SEZ). The response clarifies that hollow block production is a manufacturing activity subject to excise duty, not service tax.