Service Tax Applicability on Contractual Jobs within Factory Premises

[Sunil Agarwal]

We are manufacturer of biscuits in West Bengal and appointed an individual person in our factory premises for packing of biscuit packets in cartoons. We sale the biscuits so packed in cartoon. The person sends his men in our factory premises for such packing. The person raise monthly bill for his contracted charges. Say, Rs. 0.50 per cartoon or so on.

My question is -

1. Whether this work will be treated as job work and/or be treated as manufacturing activity?

2. Whether Service tax is payable on the above work?

3. Who will pay the Servivce Tax?

4. Which section or notification dels in this issue.

AI Summary

Service tax liability on contractor packing disputed as job work or manpower supply; tax treatment hinges on contract substance.
Whether contractor packing in the manufacturer's factory is treated as job work/part of manufacture outside service tax or as a taxable manpower supply service turns on the contract's substance: lump sum execution with contractor control and payment per quantity supports treatment as job work excluded by the Negative List and assessed under central excise, whereas payment per time/HR and employer like control supports classification as manpower supply attracting service tax and possibly reverse charge under notified rules.