28 November 2014
Dear Sir/Madam, Ours is a animal feed manufacturing industry. We procure raw materials and give it to a processor who in turn manufactures and gives finished product to us, which is sold directly to customer. We pay processing charges to him which includes Loading and un loading charges and production charges. Our final product is NIL rate product (no excise duty is applicable). In this scenario, would there be any implications of Service tax and whether Service tax notification no.8/2005 would be applicable?
28 November 2014
As per negative list you are not liable to pay service tax being manufacturing activity. If Central Excise duty is leviable on a particular process, as the same amounts to manufacture, then such process would be covered in the negative list even if there is a central excise duty exemption for such process.
28 November 2014
If the above process amount to be manufacture then it is not liable to service tax as per section 66D i.e. the process should be mentioned in Central Excise Tariff Act 1985.
Notification New Delhi, dated 1st March, 2005. No. 8/2005-Service Tax 10 Phalguna, 1926 (Saka) G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 93 of the Finance Act, 1994 (32 of 1994) (hereinafter referred to as the Finance Act), the Central Government, on being satisfied that it is necessary in the public interest so to do, hereby exempts the taxable service of production of goods on behalf of the client referred in sub-clause (v) of clause (19) of section 65 of the said Finance Act, from the whole of service tax leviable thereon under section 66 of the said Finance Act: Provided that the said exemption shall apply only in cases where such goods are produced using raw materials or semi-finished goods supplied by the client and goods so produced are returned back to the said client for use in or in relation to manufacture of any other goods falling under the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), as amended by the Central Excise Tariff (Amendment) Act, 2004 (5 of 2005), on which appropriate duty of excise is payable. Expalantion.- For the purposes of this notification,- (i) the expression “production of goods” means working upon raw materials or semi-finished goods so as to complete part or whole of production, subject to the condition that such production does not amount to “manufacture” within the meaning of clause (f) of section 2 of the Central Excise Act, 1944 (1 of 1944); (ii) “appropriate duty of excise” shall not include ‘Nil’ rate of duty or duty of excise wholly exempt. [F. No. 334/1/2005-TRU] (V. Sivasubramanian) Deputy Secretary to the Government of India
you have to check the definition of manufacture . if it come under manufacture then you have to pay service tax. due to above said noti. not cover the NIL duty rate excise duty.
Thanks for your reply. We provide raw materials to the processor and he produces the final product which is directly sold to the customers. In that scenario, it amounts to manufacture as no manufacturing activity is done at our end. You mean to say that in such a case, service tax will be applicable. It is the job worker, who has to pay it right?
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