Service Tax on Job Work

[Sanjeev Sharma]

Unit Y got job order from Unit X to manufacture plastic boxes. Raw material will be supplied by X. X will do some finishing work i.e. labelling etc at their own before billing to customer. What chargeability arises for excise duty/ service tax on the part of Y & X both. Will unit X get any modvat/cenvat credit against tax charged by unit Y, if any.

 

AI Summary

Job work excise treatment: principal manufacturer bears duty and may claim cenvat; service tax generally not leviable.
Job work comprising manufacture, packing and labelling using principal supplied raw materials is treated as manufacture for excise; the principal can discharge duty under the job work exemption procedure, enabling the principal to claim cenvat credit while the job worker remains exempt from duty. Manufacturing by the job worker is not subject to service tax. Cenvat reversal issues arise for input services used by the job worker, but established authorities have held that where the principal pays duty under the prescribed undertaking, goods processed under the job work exemption are not treated as exempted for cenvat reversal purposes.