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

Manufacture characterization of hollow blocks determines tax treatment, not business auxiliary service classification.
Whether manufacture of hollow cement blocks by a contractor constitutes manufacture for indirect tax purposes rather than a business auxiliary service. If subcontractors act as hired labour under contractor control, the contractor is the effective manufacturer; independent subcontractors may be treated as manufacturers. Because the product falls within excise tariff classification for building materials, the operation is not liable to service tax as a business auxiliary service. Valuation and any residual service tax depend on whether the supply is predominantly manufacture and on the factual subcontracting arrangements; the SEZ location and developer status influence exemption considerations but do not alter the manufacture characterization.