Liability of excise or service tax - galvanization

[Chalapathy Rao Marthy]

Dear sir, As per Notification No.22/2002 NT the process of Galvanization amounts to manufacture and also as per Section 65(19) of  Finance Act, 1994, Production or processing of goods on behalf of the client is liable to service tax. With the above background please clarify whether a client who is engaged in galvanization of steel is liable under service tax or excise act.

[Madhukar N Hiregange]

The activity of processing falls under BAS category and specifically excludes the processes amounting to manufacture under Section 2(f). This includes the deemed manufacture. Therefore if under excise a process amounts to manufacture then the same canot be subjected to servcie tax. In your case only CED would be applicable after the exemption of 150 lakhs.

AI Summary

Processing that amounts to manufacture cannot attract service tax; central excise duty applies as primary levy. Processing falls within the BAS category but excludes processes amounting to manufacture, including deemed manufacture; therefore where a galvanization process amounts to manufacture under excise law it cannot be subjected to service tax and Central Excise Duty applies, subject to the applicable excise exemption threshold.