Job work exemption

[Guest]

Dear All 

We are undertaking Job work for HAL Job work carried out to HAL are exmpted under Central Excise notification No.70/92CE. Items manufactured by HAL (Final Product) are supplied to defence are exempted from payment of Central Excise duty. Job work carried out by us are in the nature of manufacture as defined under section 2(F) of Central Excise Act.

Since the final product are cleared under NIL/ Exempted rate of Central Excise Duty, are we liable to pay service tax on job work carried out by us as per Service Tax Notification No.8/2005 ST, Kindly Clarify

 

[rajkumar shukla]

As admitted in the query itself, the process is amounting to manufacture, hence the activity undertaken is out of purview of service tax as per definition of business auxiliary service it self.

[YP SOOD]

The activity is covered under Business Auxilliary service . As per statutory provisions.....

'Business Auxiliary Service" means any service in relation to,—

     (i)  promotion or marketing or sale of goods produced or provided by or  belonging to the client; or

      (ii)  promotion or marketing of service provided by the client; or

      (iii)  any customer care service provided on behalf of the client; or

      (iv)  procurement of goods or services, which are inputs for the client; or

          Explanation.—For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, "inputs" means all goods or services intended for use by the client.

      (v)  production or processing of goods for, or on behalf of, the client; or

      (vi)  provision of service on behalf of the client; or

      (vii)      a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi) such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance inventory management, evaluation or development of prospective customer or vendor, public relation services, management  or supervision,

and includes services as a commission agent, but does not include any activity that amounts to manufacture of excisable goods.

It has been stated by u that activty carried out by u is in the nature of manufacture under section2(f) of the CE Act as such ST is not payable.under BAS.

[Guest]

Dear sirs,

In this issue, it is mentioned as "manufacture of excisable goods".   So, our consultant is telling that since HAL exempted from payment of excise duty, service tax exemption is not eligible to us.  Hence please clarify.

[rajkumar shukla]

CERTAINLY THE SERVICE TAX EXEMPTION IS NOT AVAILABLE TO YOU AS YOU DON'T NEED IT. APPLICABILITY OF NOTIFICATION NO. 8/2005  IS TO BE EXAMINED ONLY WHEN SERVICE TAX IASAPPLICABLE IF IT IS NOT FALLING IN B.A.S ,THERE IS NO NEED TO GO THROUGH THE NOTFN...

[Guest]

Thankyou very much for your reply sir.

[Vijay kumar]

Notification No.8/2005-ST grants exemption from Service Tax when either of the conditions of manufacture (u/s 2(f)) or payment of duty on final product is satisifed. In your case, the first condition is satisfied, as stated by you. Hence, irrespective of whether HAL pays the duty on the final product or not, u will get exemption from Service Tax under BAS in terms of the said Notification.

AI Summary

Manufacture-based exemption applies: service tax not payable on job work that amounts to manufacture under law. Job work that constitutes manufacture under the statutory definition is excluded from the Business Auxiliary Service charge, so service tax is not leviable on such job-work operations irrespective of whether the principal pays excise duty or the final product is excise-exempt; notification-based exemption is relevant only if the activity does not amount to manufacture.