Statutory Obligations

[Pradeep Jain]

Dear Sir,

Good morning,

Our company willing to outsource one of its operations (heat treatment) on our component within the plant. To perform this activity, Building will be provided free of cost. In addition to that some consumable, such as power, water etc., will be provided on chargeable basis. Some of consumable will be purchased by them directly from the market.

Now our query is that:-

1. What will be flow of document for movement of material before and after heat treatment ?
2. Is there is any Excise Duty and Service Tax liability on the said entity who is carrying this activity at the time of sending the goods after heat treatment; although Excise duty is payable by our company on the final product where in heat treated components to be consumed ?
3. In case of receipt of consumable directly by the said person , may mention our address for delivery of consumable for heat treatment;
4. What will be other statutory obligation; any intimation or registration to other state Govt. department?
5. With best regards
6. Pradeep Jain

AI Summary

Job work exemption for in house heat treatment avoids service tax and treats in house manufacture as excise exempt captive consumption.
Outsourcing heat treatment within the principal's premises is job work; internal memos/challans should document movements, consumables charged by the principal are part of job charges, and the job worker is not liable to service tax under the job-work exemption. Heat treatment performed in-house constitutes manufacture but, when consumed in the principal's final product, is treated as captive consumption and exempt from excise. The principal should intimate the Range Officer and maintain simple accounts to monitor movements.