Materials used in the job under port services

[Asked by Guest]

 

Dear Experts

I am running ship repair services inside the Mumbai Port Trust ( We are the registered in MBPT to do ship repairs within the premises of MBPT). Accordingly we registered ourselves under port services category. We do repairs which include materials in that. Since these are job work we cannot charge materials alone in the bill. But we know the quantum of materials used in each and every job value. Accordingly we charge 12.5% vat on the materials used in the job value, remaining value taken as Services, we charge 12.36% service tax. But Service tax dept urges us to pay the service tax on the total value i.e including material value. Their contention is that we cannot take material execmption of Notificataion No 12/2006. Since we are registered under MVAT, we have to pay vat also. But after paying vat on materials, we have to pay 12.36% on the total cost, including mtrls cost + mvat paid. Is Service tax deptt right in saying or what we follow is right?  Advise me

AI Summary

Material value exemption: VAT paid materials can be excluded from service tax when documentary proof is available.
Dispute centers on whether materials used in port ship repair jobs must be included in taxable service value. The department relies on valuation rules and a circular limiting the notification exemption to goods sold with documentary proof; forum respondents counter that Notification No.12/2003 ST permits exclusion of material value where documentary evidence (VAT payment, consumption records, CA certificate) shows the material component and that such evidence has been accepted in authority. Practical advice: register under VAT, document material costs, pay VAT on materials and charge service tax only on the service portion while preserving records to resist assessments.