Applicability of excise and service tax on job work

[Asked by Guest]

A manufacturing company, registered with excise doing jobwork with the help of CNC wire cut machine. The jobwork done is to cut the metal peice(send by customer on challan) as per design given by the customer. The part ultimately find place in the die assembled by the customer. The customer is also registered with excise but the product on which the jobwork done is not sold as the same is capital expenditure for him of in few cases it is repair of die. Please advice about the applicability of excise and service tax on job work done. Thanks kailash

The jobwork done which does not amount to manufacture is liable for service tax under Business auxiliary service. In your case, it is felt that the component of jobwork does not suffer excise as it is not manufacture per se, the same would be liable for service tax.

[Surender Gupta]

I agree with the view of Sh. V Ramanujam. You have to ensure the nature of activity undertaken by you is manufacturing activity or not. Further if the main manufacture is paying appropriate duties of excise, you again claim exemption from service tax.

[VENKATESH KRISHNAMOORTHY]

You will have to argue that both Excise duty and Service tax is not applicable. Further your stand should be that this activity is manufacturing since the Manufacturing company registered with excise does not have the machine they are outsourcing this to you, hence this is manufacturing activity. Whether they are selling it as it is or repairing it or using it inhouse is not relevant since the part assists the company to produce the finished goods and the finished goods ultimately suffer excise duty. The cost of the jobwork and the part will be included in the manufacturing cost. Service tax is not applicable on manufacturing.

AI Summary

Service tax applicability on job work: may apply as business auxiliary service unless activity qualifies as manufacture exempting service tax.
The tax characterisation of CNC job work cutting customer-supplied components is disputed: one view treats the activity as non-manufacture liable to service tax as Business Auxiliary Service, with possible exemption where the principal pays excise on finished goods; an alternative view treats the work as outsourced manufacture, incorporating jobwork cost into manufacturing cost and excluding the operation from service tax.