IMPORT OF FREE ISSUE MATERAL-Required Procedure

[HITENDRA DAVE]

Dear Sir, We have one order to be executed at our Unit under the following Conditions : Customer will issue us required Free Issue Material for working. We will undergo for a Fabrication work (Labor Charges Only) at our shop (without any material belonging to our ownership, not even consumables). We will bill them only for Labor Charges. We require your advise on following ground : We are the complications in nature of Excise & Custom formalities for import of Free Issue material and Export of Finished Product. What is the regulation in terms of Service Tax because we are billing them for labor charges – Whether Service Tax will be leviable or not ?

Regards,

Hitendra dave

[Surender Gupta]

Your issue needs to be visited in detail since it is to be ascertained the nature of transaction. It is required to be ascertain that the resulting product / finished goods are in the nature of manufacture and excisable product or not? Once this issue is ascertained, the issue of levy of service tax on the impugned activity would become easy to decide.

AI Summary

Service Tax treatment depends on whether the fabrication is manufacture or a pure labour service; levy follows characterisation. Importation and use of free issue material for fabrication triggers customs and excise compliance if the activity amounts to manufacture and produces an excisable finished product; related import, export and excise formalities flow from that characterisation. Liability to service tax on billing for labour/fabrication charges depends on whether the activity is a taxable service distinct from manufacture or part of a manufacturing process, and must be determined by ascertaining the transaction's true nature.