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Applicability of excise on jobwork

Manoj (Manager Accounts and Admin) (25 Points)

11 October 2011

Hi,

We are a manufacturing unit registered with Central Excise. We have got an order for doing job work from another unit which is not registered with Central Excise. They are supplying us the material and we are doing some operations on it like punching and bending and returning the same to them along with scrap. I would like to know whether we need to charge excise duty on those materials when we bill them as they do not pay excise on their end product.

Manoj K

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12 Replies

Roshan Thomas (C.E.O ) (356 Points)
Replied 11 October 2011

Assuming that the activity undertaken by you amounts to manufacture and that it appears in CETA - then you will be liable to Excise duty, had your supplier been registered under Excise then either you or the supplier had the option of paying Excise Duty.

However, please confirm that your processing amount to manufacture before paying duty!! I doubt it...

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R P Ananthakumar (Sr. Officer - Central Excise/Cash) (514 Points)
Replied 12 October 2011

This will not come under manufacturing activity.

In this case, you are rendering your service to the customer. In this case, you act as a service provider. Hence, you may raise the service bill and to pay applicable service tax.

Aashish Padol (EXCISE EXECUTIVE) (206 Points)
Replied 12 October 2011

Originally posted by : R.P. Anantakumar
	This will not come under manufacturing activity. In this case, you are rendering your service to the customer. In this case, you act as a service provider. Hence, you may raise the service bill and to pay applicable service tax.

i agree with Ananthkumar ji.

Gaurav (student) (89 Points)
Replied 12 October 2011

i agree with R.P. Anantakumar sir....you can also refer to Rule 16A of The Central Excise Rules 2002.

Manoj (Manager Accounts and Admin) (25 Points)
Replied 12 October 2011

Anantakumar Sir, I thought so too. But we are not registered with Service Tax as we are not doing any service activity. And since this is just a one off transaction.... so wanted to know how to handle it.

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R P Ananthakumar (Sr. Officer - Central Excise/Cash) (514 Points)
Replied 12 October 2011

either u or ur customer must to registered with service tax and pay the tax. there is no another way .

suresh thankappan (Asst Manager) (23 Points)
Replied 12 October 2011

I agree with Mr.R.P. Anantakumar, a manufacturing unit is liable for paying excise duty only on goods manufactured for sale. If any job work done for third party, there is no liability of excise duty. But you are providing a service to third party, so service tax has to be paid either by you or third party.

suresh thankappan (Asst Manager) (23 Points)
Replied 12 October 2011

Yash Anandkumar Mandavia (Practising Chartered Accountant) (184 Points)
Replied 13 October 2011

Dear Manojbhai,

There is a specific circular regarding jobwork issued under Central Excise Act, 1944.. I dont exactly remember the no. of the same. Accordingly, there are certain conditions specified in the same. I would kindly suggest you to go through the same and have the complete conceptual clarity with regards to your situation......

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 13 October 2011

Originally posted by : Manoj
	Hi, We are a manufacturing unit registered with Central Excise. We have got an order for doing job work from another unit which is not registered with Central Excise. They are supplying us the material and we are doing some operations on it like punching and bending and returning the same to them along with scrap. I would like to know whether we need to charge excise duty on those materials when we bill them as they do not pay excise on their end product. Manoj K

ask your principal to follow procedure of notification no 214/86, charge service tax on job work,

in absence of above, you would be catagorized as deemed manufacturer and excise would get levied on yourself.

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vinay jain (CA & CS Executive) (85 Points)
Replied 15 October 2011

Definiotion of Business auxialery service-

business auxiliary service” means any service in relation to, —

(i) promotion or marketing or sale of goods produced or provided by or belonging to the client; or

(ii) promotion or marketing of service provided by the client; or

[ * * * * ]

(iii) any customer care service provided on behalf of the client; or

(iv) procurement of goods or services, which are inputs for the client; or

[Explanation. — For the removal of doubts, it is hereby declared that for the purposes of this sub-clause, “inputs” means all goods or services intended for use by the client;]

[(v) production or processing of goods for, or on behalf of, the client;]

(vi) provision of service on behalf of the client; or

(vii) a service incidental or auxiliary to any activity specified in sub-clauses (i) to (vi), such as billing, issue or collection or recovery of cheques, payments, maintenance of accounts and remittance, inventory management, evaluation or development of prospective customer or vendor, public relation services, management or supervision,

and includes services as a commission agent, [but does not include any activity that amounts to manufacture of excisable goods].

Thus assuming that u r undertaking the same activity in job work as undertaken in ur normal manufecture which is amouting to manufecture. Service tax is not payable. question is only excise u can avail the exemption notification provided to job worker if any.