14 September 2007
That My client had done fabrication with separate contract for fabrication work as the activity of fabrication covers under Excise but when tanks or pipe supports are fabricated at site though not embedded in the earth, are erected at site, stage by stage, and after completion they cannot be physically moved. But on sale/disposal they have necessarily to be dismantled and sold as metal sheets/scrap. It is not possible to assemble the tank or pipe supports all over again. Such tanks or pipe supports are, therefore, not moveable and cannot be considered as excisable goods. In my client case all the items assembled or erected at site and attached by foundation to earth cannot be dismantled without substantial damage to its components and thus cannot be reassembled, then the items would not be considered as moveable and will, therefore, not be excisable goods. This has been clarified by the department vide circular dated Order No. 58/1/2002-CX, dated 15-1-2002. This satisfies that the activity which My client is doing on site is not excisable. If the said activity is done from the factory and then finished tanks are removed from the factory to site then it becomes excisable as it is movable at the time of removal from factory. Therefore it not wholly exempt from excise activity and it is exempt if it is considered as moveable, although it amounts to manufacture under section 2(f) of the central excise. 1. Now the Question if that Weather the Job work of Fabrication done by client is covered under Business Auxiliary service?
2. Is the Job worker can Claim exemption under Notification No. 8/2005-S.T., dated 1-3-2005 which says that if the finished goods amounts to manufacture under central excise then it is exempt under service tax?
23 October 2007
In my opinion the service would fall under COMMISSIONING AND INSTALLATION SERVICE.
Value of taxable service shall be the gross amount charged by the service provider of such service rendered by him.
However, it does not include the cost of parts or other materials, if any, sold to the customer during the course of providing commissioning or installation service.
Service tax is to be paid on 33% of gross value if the Commissioning or Installation services are provided alongwith supply of Plant, Machinery or equipment, provided that gross value is inclusive of value of Plant, Machinery, equipment, parts or any other material sold and no exemption is claimed under Notification No.12/2003 S.T. dated 20.06.2003 (Notification No.19/2003-S.T. dated 21.08.2003).
In case of commissioning and installation it has been pointed out that in case of turnkey project, the contract may be indivisible and no separate value could be assigned to commissioning or installation of goods. Doubts have also been raised as to what would be the value of taxable service. It is submitted that it has been provided in law that service tax is leviable on erection and commissioning charges only and not on the material and goods supplied. However, it is upto the service provider to show the break up of commissioning or installation charges. In case service provider shows consolidated charges, service tax would be leviable on such consolidated amount.
In the second query he cannot claim the exemption as you have already stated that it does not amount to manufacture, since excise duty is not payable
You may evaluate your position in light of the above clarification and take appropriate action.
23 October 2007
Mr. Dayal, thanks for your kind infirmation but i am not satisfy with ur reply as I had already Stated that it amounts to manufacture under central excise but it is not excisable under circular no. 58/1/2002-CX, dated 15-1-2002. secondly my Quarry is on Fabrication and not on commissioning & instalation....... as i already know which is ansewred by u.......kindly go through the quarry again.
CAclubindia
