Applicability of service tax - category -

[sunil mehta]

A pvt.ltd. co. gets an order for manufacture & supply of 'Precast RCC Block'. a)All the materials likecement,steel,kapchi,sand etc) will be procured from the market by that pvt.ltd.co . b)Part of the mfg.work will be given to a subcontractor. c)Then job-worker will send such partially mfg. block to the premises of pvt.ltd. co.Cement, Sand and kapchi will be filled in such 'hollow' blocks by pvt. ltd. co. to make it solid RCC Blocks.The finished product-PRECAST RCC BLOCK' will be transported by pvt. ltd. co. to the original buyer. Query:-1)Whether Manufacture & supply of 'precast RCC Block will under the scope of service tax or c.excise? 2)If,service tax then under which category? 3)If it it comes under C.Excise,then whether basic exemption of rs.1.5 crs. will be available to pvt.ltd. co.? 4)Whether above activity can fall under 'Industrial/commercial services' ?(since it involves manufacture of 'civil structure'i.e large RCC industrial purpose RCC block)

[Ravi Chopra]

The issue involves various technical points. Like undertaking of work by the job work - whether such activity is amounting to manufacture or not. Construction or making of pre-cast RCC blocks is itself a manufacturing activity and subject to duties of central excise under chapter 68 of the Central Excise Tariff. Activities undertaken by the job worker need to seen in detail.

[sunil mehta]

Dear Ravibhai, 100% materials and labour is to be borne by pvt. ltd.co.Buyer will not supply any material. Pvt.ltd.co. will appoint a contractor to manufacture 'Rectagular Hollow block(made of iron rods) on job work basis.The material iron rods will be supplied by pvt.ltd. co. c)Then job-worker will send such partially mfg. block to the premises of pvt.ltd. co.Cement, Sand and kapchi will be filled in such 'hollow' blocks by pvt. ltd. co. to make it solid RCC Blocks.The finished product-PRECAST RCC BLOCK' will be transported by pvt. ltd. co. to the original buyer. d)Then pvt ltd. co. will raise sales invoice for supply of 'precast RCC Block'. Note:No brand NAME /LOGO is put on such RCC block. 1)Pl. answer my original querry in context of further information supplied now. 2)If mfg.activity comes under c.excise then basic exemption of rs.1.5 crs. is available to that pvt. ltd. co.?(Note:There is no turnover except RCC block supply turnover of pvt.ltd.co.) 3)Pl. answer point 4 of my query also.

[Surender Gupta]

Bare understanding of the query reveals that preparation of 'Rectangular Hollow block' from steel rods are not a manufacturing activity and liable to service tax as processing of goods on behalf of client. But the same is exempt from service tax where the product is liable to duties of excise under notification no. 8/2005. Where the principal is availing exemption under excise, the benefit of notification is not available. On the other side, construction of RCC blocks by the company itself, constitute a product which is liable to duties of excise under chapter 68 if all the other conditions are satisfied including the test of marketability. Further, the construction of RCC blocks are eligible for SSI exemption upto 1.5 crores. Since the company is undertaking manufacturing activity on its own premises and supply the complete blocks to the buyer, the question of service tax under industrial or construction service or under works contract category is not arisen.

AI Summary

Manufacturing classification determines excise liability rather than service tax for precast RCC block supplies, subject to excise law. The key operative position is that converting hollow blocks into finished precast RCC blocks on the company's premises constitutes manufacturing activity liable to duties under Central Excise chapter 68, making the supply excisable rather than a taxable service. Job-worker processing requires distinct analysis: if the processing yields an excisable final product, service-tax notifications may exempt processing, but the principal's excise exemption status influences availability of those exemptions. SSI/excise exemption remains subject to statutory conditions and turnover limits.