Service tax on job work to job work

[Gangadhar Haldikar]

As per entry 30 of 25/2012, "Carrying out an intermediate production process as job work in relation to any goods excluding alcoholic liquors for human consumption, on which appropriate duty is payable by the principal manufacturer." is exempt.

Suppose the principal manufacturer gives job work to job worker A, who in turn, gives it to job worker "B". Now service in the hands of first level job worker is undoubtedly exempted. But is the service exempted in the hands of second level job worker "B" also? Because it is in relation to goods on which duty is payable by principal manufacturer, though the PM is not the direct customer of the second level job worked. The entry does not require it either.

Plain reading of the entry suggests that exemption should be available.

Views please.

AI Summary

Service tax exemption on job work may extend to sub-job workers when exemption tied to goods' duty status.
Dispute whether the Mega Exemption for "intermediate production process as job work in relation to any goods on which appropriate duty is payable by the principal manufacturer" covers second level job workers. One practitioner argues that if the process amounts to manufacture, Central Excise duty paid by the principal brings both job workers within excise treatment (not service tax); if it does not amount to manufacture, Service Tax is leviable on each job worker. Another practitioner contends that for the disputed period job work services were exempt from service tax irrespective of the manufacture test.