29 November 2012
Dear Sir, My client is a private limited company engaged in providing manufacturing services(blending and packing of tea). My client is supplied the black tea of various grades along with the mixing formula. The activities performed by my client are to blend the tea according the given formula,pack it in marketable pouches and further pack it in distributable cartons. All raw material(tea and packing material) is supplied by the principal for whom the service is provided. For performing these services my client is paid manufacturing and packing charges. Whether this manufacturing charge is subject to service tax.
Excise and service tax cannot be levied simultaneously either Excise duty will be levied or Service Tax will be levied. So, if you are paying Excise duty on it then the question of Service tax do not arises at all.
I request your views with respect to Blending and Packing process for Tea only. Packeted Tea is subject to Excise duty of Rs. 1 per KG. The blending and packing process is outsourced. My client who is doing the job work does not pay any excise duty. This duty is again paid only by the Principal manufacturer.
Clause (f) of negative list do exempts any process amounting to manufacture or production of goods. Manufacturing activity carried out y job worker for another person is not taxable by virtue of this entry in the negative list, but subject to the provisions that Central Excise duties are leviable on such processes under Central Excise Act,1944 or any of the state act.
Processes carried out by job worker for pricipal if not amounting to manufature then the question of Service tax shall arise.
CAclubindia
