Job work of Conversion of Milk to Skimmed Milk Powder

[RAJESH SINHA]

Dear Experts!

Our unit is a Dairy Unit and have facility of Conversion of Milk to Skimmed Milk Powder. During conversion, Cream is also separate from Milk. Many Dairy Units are contacting us for such conversion. Here, I want to clear the matter about imposing of Service Tax on such jab work. As the Product "Skimmed Milk Powder" is falling in negative list of Excise, and being our unit is a factory, does such type of job work exempt from service tax?

Kindly clear it.

-------- Rajesh Kr. Sinha (Mob No.-9835229100 / 9128891361 / 7463883911)

[Rajagopalan Ranganathan]

Sir,

Conversion of milk into skimmed milk powder amounts to manufacture under Section 2 (f) of Central Excise Act, 1944. Skimmed milk powder fall sunder sub-heading No. 0102 21 00 of the first schedule of Central Excise Tariff Act 1985 attracting 'Nil' rate of duty. Therefore such conversion on job work basis will not be liable to service tax.

[Rajagopalan Ranganathan]

Sir,

Please read sub=heading as 0402 21 00 and not as 0102 21 00. The typographical mistake is highly regretted.

[Ganeshan Kalyani]

Sir, I totally agree with Sri Rajagopalan Sir, the activity of conversion of 'Skin Milk' into 'Skimmed Milk Powder' amounts to manufacture. After process a new product has emerged and therefore it satisfies the defintion of manufacture and is therefore subject to excise duty. Excise duty is NIL.

AI Summary

Manufacture classification: conversion of milk to skimmed milk powder treated as manufacture, not service taxable.
Conversion of milk into skimmed milk powder is treated as manufacture because it produces a new product; skimmed milk powder is classifiable under tariff subheading 0402 21 00 at a nil excise rate, and therefore job work converting milk to skimmed milk powder performed by a factory is not subject to service tax.