Job work - piece rate basis

[BAL KRISHAN GARG]

Sir, Ser.Tax Dept.has issued a show cause notice undated received by my client A on 30/09/09 by speed post in which dept.blaimed that A have intentionally and willfully suppressed the fact of rendering taxable serviced to B. Brief Facts : A is doing Job of Powder Coated Paints on Geysers and Blades of B in B's Premises alongwith his labour and painted goods is either used in the final product or sold by B but only after payment of duty .Dept.stated that during AGCR AUDIT the observation of the auditors that it is a case of labour supply hence they issued a notice calling the specific details from A . A has submitted all the details asked for i.e.copy of ledger ,Form -16 A ,Bank Statement ,Copy of ITR's and Copy of Bills raised during 3 YEARS. BILLS was printed as 'JOB WORK ONLY ' and the payment was also made only after completion of painting pieces and confirmation from the quality department only.A has never supplied labour for various manufacturing activities for B as stated in the notice but he alongwith his labour done the specific jobs.A has submitted all the details asked by the AC and appeared personally as required . My question is that whether it is a case of labour supply when B has given specific job to A .B has also submitted his reply to AC that he has given specific job to A on piece rate basis only. Later on the AC has also writter a letter to his authority stating that it is a case of Job Work and not a case of Labour Supply unofficially seen by the consultant (myself). Now he is blaiming and issued a show cause notice which is undated ? they also demanded for four year 05-06 ,06 -07 ,07-08 and 08-09 u/s 73 (1) when A has not mislead any information from the dept. ? I will be highly oblidged if any one can give clarification on the issue arise . Thanking You , BAL KRISHAN GARG my e-mail id : [email protected]

[Rama Krishana]

Since you have received the show cause notice, you should reply the SCN carefully. Department is following the AGCR audit observations but you can seek the copy of letter written by AC through RTI. I hope matter would be settled in due course from appropriate forum in your favor.

AI Summary

Job work versus labour supply classification determines service tax liability and dictates the response to an undated show cause notice. Classification of the piece rate painting arrangement as job work rather than labour supply controls service tax liability; the taxpayer produced invoices stating 'JOB WORK ONLY,' accounting and bank records and the principal confirmed piece rate job assignments, yet an audit treated the transactions as labour supply, resulting in an undated show cause notice seeking tax for four years. The proper response is a factual, document based reply challenging the classification and obtaining audit correspondence via right to information.