Service tax on Labour-another company

This query is : Resolved

Suresh Mouli (Querist)
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17 September 2009 we have two companies A-M in the same premisis. A is registered with CE and is export oriented with no domestic sale.

The A company uses B company and its machinery (Tangable) and premisis (Office space and Manufacturing) inclusive of labour and pays labour charges as well a hire charges to B company.

B company is registered with the Sales Tax as a manufacturing unit and does its own business of sale which is well within the CE limit of 1.50 crores, and is not registered with CE as both A & B are SSI's.

Can it be construed that the wages paid by the B company as :

1.Labour provider for A company and hence service tax is applicable.?

2.Machines owned by B company hired by A company attracts Service Tax.

3.Labour charges (Input and output material is recorded) paid by A company to B company is construed as Service provided by B company and hence service tax is applicable

Can I have an expert opinion on this.

Madhukar N Hiregange

Madhukar N Hiregange (Expert)
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03 October 2009 The agreements between the companies would be important for a proper opinion. However the process of manufacture islef on pice basis would not be liable as only processes not amounting to manufacture are liable.