Service received inhouse on piece rate basis Job Work or Manpowe Supply

[Vinay Sharma]

We are manufacturers of Auto Parts. We have been receiving services of Buffing and fettling from manpower suppliers in our factory itself, means material does not move outside our factory. Buffing and fettling are regarded as job work services which are exempt under notification  no. 25/2012 as we are paying excise duty on final product. The Job worker raises bill on piece rate basis.

Since the job worker supplies manpower in our factory he had taken registration under Manpower Services and had been deposing service tax under Manpower catagory.

W.e.f. 1st July the job worker still wants to charge service tax under Manpower catagaory on the ground that manpower is effectively controlled by our supervisors. Please reply the following quries.

1- Is raising of bill under Manpower catagory ( under reverse charge) is in order ?

2- If we take CENVAT credit of such service tax, will it be in order in view of exempted status of service under notification no. 25/2012.

Regards

[JAMES PG]

Since you are paying excise duty on final products, intermediate process undertaken will not be teated as exempted service and hence Cenvat credit is eligible subject to the provisions of CCR

AI Summary

Cenvat credit remains available where in factory job work accompanies excise paid final products, subject to credit rules. Where the manufacturer pays excise duty on the final product, intermediate operations by a job worker performed in house are not treated as exempt job work for input tax credit purposes; service tax charged under manpower supply classification therefore does not preclude the recipient from taking Cenvat credit, subject to compliance with the Cenvat Credit Rules.