Payment of service tax

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

02 May 2013 1) If a person who is a service provider does his job work on 57(F2) basic under Central Excise challan is liable to charge the service tax to the service receiver or not? In this case the service receiver can take modvet credit if the service tax is charged by the service provider?
2) If a person who is a service provider does not charge the service tax to his customer who is a central excise accesses, then who is responsible for negligence. Ultimate liability will fall on whome for not charging the service tax and paying to the government.
Regards,

Ashish Vaish

Ashish Vaish (Expert)
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03 May 2013 Dear Sir,

Pl. describe the process of job work. To decide the liability of Service tax, the basic question is whether the process of your jobwork is amounting to manufacture or not. Also inform the raw materials being received/used by you and the ultimate final products.

Querist : Anonymous

Querist : Anonymous (Querist)

03 May 2013 Our workers go to a manufacturing company and does all manual work there. The required machinery / tools are provided by the company. Ultimate final product is excise able goods and company remove the goods on payment of Excise Duty.

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Asha Kanta Sharma

Asha Kanta Sharma

(Expert)
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09 August 2024 Here’s a detailed explanation regarding your queries on the payment of service tax in the context of job work under Central Excise:

### **1. Service Tax Liability under Central Excise Challan 57F(2)**

**Scenario:**
A service provider performs job work under Central Excise Challan 57F(2) and whether service tax needs to be charged, and if the service receiver can claim Modvat credit.

**Explanation:**

- **Service Tax on Job Work:**
- Job work, where an individual or firm provides manufacturing or processing services on the goods belonging to another person, is generally subject to service tax.
- As per the Finance Act, 1994, service tax is applicable on job work services unless specifically exempted or included under a notification.

- **Applicability of Service Tax under 57F(2):**
- Challan 57F(2) is used for removal of goods from a factory for job work and does not directly relate to the imposition of service tax.
- However, if the job work is carried out on behalf of a manufacturer, and if the job worker is a service provider, they should charge service tax unless exempted by specific notifications or provisions.

- **Modvat Credit:**
- If the service provider charges service tax, the service receiver (if they are an eligible manufacturer) can claim the credit of the service tax under the CENVAT Credit Rules.
- This credit can be used to offset the excise duty payable on the final goods.

### **2. Responsibility for Not Charging Service Tax**

**Scenario:**
A service provider does not charge service tax to a customer who is a central excise assessee.

**Explanation:**

- **Responsibility and Negligence:**
- **Service Provider’s Responsibility:**
- The service provider is responsible for charging and collecting service tax from their customers and depositing it with the government. Failure to charge service tax does constitute a lapse on their part.
- If the service provider fails to charge service tax, they are liable to pay the tax along with applicable penalties and interest for the non-payment.

- **Service Receiver’s Responsibility:**
- While the service provider is responsible for collecting and paying the tax, the service receiver is responsible for ensuring that they are invoiced correctly and that proper tax is charged.
- If the service receiver is an excise assessee, they should verify that the service provider is compliant with tax regulations.

- **Ultimate Liability:**
- The ultimate liability for paying the service tax and any related penalties will fall on the service provider.
- The service provider must ensure compliance with service tax regulations, even if they fail to charge the tax correctly.

### **Summary:**

1. **Charging Service Tax:** The service provider should charge service tax on job work services unless explicitly exempted. The service receiver can claim Modvat credit if the service tax is charged and the provider complies with the CENVAT Credit Rules.

2. **Liability for Non-Charging:** The service provider is responsible for charging and paying service tax. If the service provider fails to do so, they are liable for the tax and any penalties, not the service receiver.

### **Key Points:**

- **Service Tax Applicability:** Always verify if the service provided is subject to service tax and ensure compliance.
- **Credit Availability:** Service tax paid on job work can be claimed as credit if the service receiver is an eligible manufacturer.
- **Compliance and Penalties:** Ensure that proper service tax is charged to avoid penalties and legal issues.

For specific advice and updates on service tax, refer to the latest notifications and circulars issued by the Central Board of Indirect Taxes and Customs (CBIC).