Service tax applicability

[chaganti srinivas]

Dear Sirs, We are filling our material in a hallow doors, where the doors are supplied by our customer. We have purchas order for filling charges but not as job work charges. Paying Excise duty on material involved in the transaction not paying Service tax amount. is there any complications in this transaction?.

[DEV KUMAR KOTHARI]

Sorry Mr. Chaganti, I feel that facts given by you are not complete. I just forsee that there is use of filling material, process material, technology, machines and requisite type of skilled, semi-skilled and unskilled labor under supervision. the work is done in your factory ( and not at site of customer). therefore,a manufacturing process is carried to manufaccture an excisable product and you are paying excise duty on value addition by carrying out an intermittant process to manufacture) complete doors. You are paying excise** duty on your bill raised on customer, therefore, you ar manufacturing an excisable product, therefore, there should not be levy of service tax. ** In case you mean that you are paying excise duty on filling amterial purchased and used by you, then off course matter can be different. In that case you are rendering a service, using excisable material as input, so you can claim CENVAT agaisnt CE or ST,payable by you as may be applicalbe on consideration of full facts. Whether filling amterial is your product on which you are paying CE? It is not clear. It can be a case involving supply of mterial and doing work both. Filling charges per say sound to be a charge for service. Please consider all facts correctly to come to a right conclusion. Please host your query again with full facts and your own views.

[Rama Krishana]

Yes, your transaction may be a complex transaction for the purpose of service tax or excise duty. First of all you need to ascertain whether the supplier is a excisable unit and sending goods under cenvat credit rules, 2004 or notification 214/86. IF the answer is yes, you would neither be liable to pay excise duty or service tax on the processing / filling of material in hallow doors. If the answer is no, in that case, you need to ascertain the nature of activity. If the nature of activity of filling of material is amount to manufacture, there is no service tax but excise could be there. If the activity is not amount manufacture (as it appears) in your hand, and supplier of hallow doors is not manufacturer, you need to pay service tax on your activity.

AI Summary

Service tax liability for processing depends on whether the operation amounts to manufacture or is a taxable service.
Whether service tax applies hinges on characterisation: if the filling operation in the processor's factory effects manufacture and excise duty is charged on value addition, it is treated as manufacture-not a taxable service. If instead the processor provides a service using excisable inputs that are not its finished goods, service tax may apply and CENVAT credit treatment must be considered. The supplier's excise status and application of CENVAT rules determine liability, and mixed transactions supplying material plus processing require factual classification.