Clarification on Section 194-C

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pradeep (Querist)
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28 January 2010 Dear sir pls help my office have asked me this clarification I have no other place except my friends in our club –pls help
Clarification on Section 194-C

Problem:

Our customer is supplying us three items and we use these four in our some products and finally manufacture a different product using our own material also. Our customer is selling us the products on payment of excise duty and sales tax/vat (purely a commercial transaction).

When we sell the goods to our customer we also charge the excise duty, sales tax/vat and other levies (as applicable). These are purely a sales transactions and our customer while paying us deduct the amount of material supplied by him.

Clarification sought:

1. The transactions mentioned above are covered under the definition of “Work” or not. If not, How?
2. If covered, what declaration we have to give on the Invoice.
3. How value addition to be calculated? Whether it should be in proportion to Raw Material and BOP content (supplied by Sunbeam) in the Sale Price or some other formula to be devised.
4. Registered as manufacturer under Central Excise Act Sec-2(f). Can be termed as contractor?

CA Prashant Gupta

CA Prashant Gupta (Expert)
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28 January 2010 as per your data it is not covered u/s 194C. As you are purchasing material and manufacture then sale to person (whether it is supplier of raw material or any body else).
On selling he is charging excise and in purchasing he is paying excise so it is sale and purchase not job work.
So tell him to not deduct TDS.
No special declaration on invoice is necessary as it is simple sale-purchase.

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