Powder Coating - Service Tax

[Srivatsan Krishnamachari]

Dear Experts,

Please help in the below issue.

We are doing powder coating work on job work basis. We raise bill for job work charges only and involves our material also for processing the same.

In this transaction, what is the percentage i have consider on the bill value for Service tax payment and for the Sales tax payment.

Thanking you in advance

Srinivas

[Rajagopalan Ranganathan]

Sir,

By doing powder coating if a new product emerges with a distinct character and use then the process done by you amounts to manufacture under Section 2 (f) of Central Excise Act, 1944. If it amounts to manufacture no service tax is payable. However please provide details of the material which is subjected powder coating process.

[YAGAY and SUN]

Powder coating is specifically exempted in the Negative List/Mega Exemption Notification. Hence, liable to Central Excise Duty.

[KASTURI SETHI]

I support the views of M/s.YAGAY and SUN. Powder coating does not amount to manufacture. Here is case law:-

2008 (10) S.T.R. 317 (Tri. - Bang.) = 2008 (1) TMI 105 - CESTAT BANGALOREA.G. SHIBU Versus COMMISSIONER OF CUS., C. EX. & S.T., COCHIN

[Ganeshan Kalyani]

Powder coating does not change the product. The identity of the product remains the same. No new product has come. Hence the process does not amounts to manufacture. Hence section 2 (f) of central excise provision does not applies. Therefore it is a service and service tax is applicable.

The case is clear. Thanks to Sri Kasturi Sir for providing the legal back to the reply. Thanks.

AI Summary

Classification of powder coating as manufacture determines whether central excise applies or it remains a taxable service.
Whether powder coating constitutes manufacture hinges on whether the process produces a new product with distinct character and use; if so, central excise applies and service tax is not payable. Respondents offered competing positions: powder coating may be treated as manufacture when it alters product identity; others note exemption frameworks and tribunal precedent indicating powder coating does not change identity and is thus a service. Determination depends on material facts, classification principles, exemption notifications, and case law.