Service Tax Laibility

[kamal negi]

Hello Sir This is Kamal Negi my query is following:-

1) We are a excisable unit situated in sonepat (HR), can we do job work for a unit situated in Exempted Zone like Uttarakhand & Himanchal and what will be role for Service Tax.

2) We are not registered in Excise but registered with service tax, can we do job work of a excisable unit giving us material on terms of 62% recovery of 100% material at conversion charge of ₹ 8/- Per Kg. We are receiving material from franchise of excisable unit and sending material after processing to another job worker on behalf of excisable unit for further process. Please clear service tax role and if any other laibility.

Kindly reply sir.

Rgds

K.S.Negi

[Ganeshan Kalyani]

In my view you can do job work for the unit at exemption area. If the process amounts to manufacture then no service tax otherwise yes.

[KASTURI SETHI]

Sh.Negi Ji,

I agree with Sh.Ganeshan Kalyani, an expert. I further add as under:-

If finished excisable goods are dutiable but exempted by virtue of Notification (may be area based exemption or value based exemption i.e.SSI) and process amounts to manufacture, you will have to pay CE duty on job-worked goods as exemption from CE duty under Notification No.214/86-CE as amended from time to time, is conditional. Exemption on job-worked goods is available if principal manufacturer pays the duty payable thereon. If principal manufacturer does not pay duty on finished products by virtue of areas based exemption, duty has to be paid by job-worker on the said goods up to the processes undertaken by him(job-worker). There are also other conditions mentioned in the above notification. Duty must be paid on finished goods or duty should be paid on job-worked goods (semi-finished/intermediate goods). So you will have to get yourself registered with Central Excise Department for manufacture and clearance of job-worked goods on payment of duty.

[YAGAY andSUN]

We endorse the views of the experts.

[KASTURI SETHI]

M/s.YAGAY AND SUN,

THANK YOU, DEAR SIRS.

[Ganeshan Kalyani]

Thanks Sri Kasturi Sir for detailed reply. It enriched my knowledge. Thanks.

[DR.MARIAPPAN GOVINDARAJAN]

I also endorse the views of Shri Sethi.

AI Summary

Manufacture determination: job work may attract excise duty and require central excise registration when processing amounts to manufacture. Determination whether processing amounts to manufacture controls tax treatment: if the operations amount to manufacture, service tax is not applicable; otherwise service tax may apply. When finished goods are excisable but exempt under a notification, exemption for job-worked goods is conditional on the principal manufacturer paying duty; if the principal does not pay due to area-based exemption, the job-worker must pay central excise duty on goods up to the processes he undertakes and should register with Central Excise for manufacture and clearance.