Procedure to be followed for Job processing

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Anoop (Querist)
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13 June 2007 FACTS of the case
1. KCR has entered into a job processing agreement with QT, Mumbai.
2. KCR has received 419 Kgs of semi finished product from MBA, Daman, for job processing.
3. MBA is doing job processing for QT, Mumbai.
4. The semi finished product has arrived with a Challan which states “Old rule 57AC [5(a)] and New Rule 3 and 4[5(a)]”. The name and address of the supplier/manufacturer is written as “MBA, Daman”
5. The material after further processing would be sent back to MBA, Daman a/c of QT.

NOTE
a. Normal procedure being followed by KCR in similar case was to obtain a letter from the PROCESSEE addressed to our jurisdictional Deputy Commissioner, intimating the DC about the processing at Kancor under notification 214/86 dated 25-03-86, and that the same would be used in manufacture of final products in the PROCESSEEs factory. KCR would obtain an acknowledgment from Excise Office on this letter and keep the same in its file. A D3 intimation would be filed with the Supdt and acknowledgment of the same is also obtained for the file.
b. In the current situation, QT is of the opinion that the job processing is under rule 3 & 4(5a) of Cenvat Credit Rules, and that it requires no intimation to be given to the jurisdictional DC/AC of KCR.

QUERRY
1. What is the procedure to be followed by KCR in this case?
2. If the processing amounts to manufacture, whether excise duty is chargeable to QT?
a. If yes, what are the procedures to be followed for determining the assessable value of the material?
b. What is the procedure of invoicing/charging the duty?
3. If the processing does not amount to manufacture and service tax is to be charged on the processing charges, whether there are any difference in the procedures to be followed?
4. Which are the applicable sections/rules for the above cases?