29 April 2012
namaste all, my query regarding applicablity of service tax and excise duty on below activity a concern given job work with some techical specifications along with some material and some material will be purchased by the job worker and after finishing the work he raises bill/invoice for his work . 1)now while raising bill how the transaction has to be treated works contract or sale
2)if it is excisable and he is registered under excise (claiming input credit)is service tax applicable,
3) if service tax applicable and not registered under service tax(registered under excise) what about service tax in case of pure labour jobs and jobs with materials.
From your query I understand that ABC would supply raw material to XYZ, ajob worker and he would also purchase some additional raw material for performing the rest of the task.
Ans 1) No. This transaction would typically a sale transaction bcz XYZ would transafer property in goods at the end of contract i.e. when raw materials gets converted into finished goods. So, as per my understanding its a pure sale contract.
Ans 2) In Q 2 its seems that you are confused with 2 law i.e. Excise Act and Service tax .
As mentioned above, its pure sale transaction and not a service transaction. Therefore, XYZ would have to get himself registered under excise Act in order to claim CENVAT credit.
Ans 3)This transaction is not a pure labour job as partly material is purchased by XYZ on his own account.
This transaction would be classified as a Pure labour contract as and when work is done as per the specifications given by the raw material supplier.
For example : A customer goes to a tailoring shop accompanied by a suit length in his hands and entrusts the same to the tailor for stitching a suit for him as per his measurements. The tailor by devoting his skill and labour stitches the suit and delivers the same to the customer. In this process the tailor utilizes lining, buttons and threads of his own. The transactions would remain a contract for work and labour. The stitched suit delivered by the tailor to the customer is not a sale. It would not make any difference if the customer would have selected a piece of cloth of his own choice for a price to be paid or paid and having purchased the suit length left it with the tailor for being stitched into a suit. The property in the suit length had passed to the customer and physical possession over the suit length by the tailor thereafter was merely that of a bailee entrusted with the suit length. However, if the tailor promises to stitch and deliver the suit for a price agreed upon, investing his own cloth and stitching materials such as lining, buttons and threads and utilizing his own skill and labour then though the customer might have chosen the piece of cloth as per his own liking as to the texture, colour and quality and given his own instructions in the matter of style, the transaction would remain a contract for sale of goods, that is a stitched suit piece inasmuch as the object of the contract was to transfer property in the stitched suit piece along with delivery of the suit by the tailor to the customer, all investments, whether of material or of skill and labour having been made by the tailor incidental to the fulfillment of the contract.
06 May 2012
thank you, in above contract can service part and material part are divisible and pay EXCISE AND SERVICE tax, 2nd query is TDS applicable for above works contract if appliable what is the basis
CAclubindia
