service concern

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PrabhuJ (Querist)

13 December 2010 Dear Experts,
Could you explain how to address following query.

Company 'A' receives a job from company'B'.
1.Material purchased by company 'B' directly send to the company 'A' free of cost (incl.own material & material purchased from 3rd party)
2. company 'A' received the mat. with specification,then converted the material into
particular specification. after that invoice made in follg.manner
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Labour charges 100
Cost of material 50
Mat.given by Comp ‘B’)
Gross margin(10%)on material 5
-----
105
Ex. Duty 15
Cess 0.45
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120.45
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3.Excise duty input credit taken by company‘A’ eventhough goods received free of cost and it adjusted against excise duty as per Invoice raised by company‘A’.
My question is,
 Why service tax bill is not raised,whether is it correct method?
 Excise duty input credit taken by company ‘A’ is correct or not?
If this procedure is not correct what is the correct procedure?

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)

13 December 2010 In this case company A or B may pay the excise duty. Since, company a is paying the duty in this case a job work unit, they may calim input credit, no matter material is given for job work.

In this case , service tax bill could not be raised. Becasuse this is a manfacturing activity.

PrabhuJ

PrabhuJ (Querist)

14 December 2010 thank you for your answer and i must differentiate mfg. and service activity. If you have any idea or experience in your job pls share with me sir..

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