Service Tax on Job Work

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hari (Querist)
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16 April 2010 We are manufacturing MS pipes. We are coating the pipes with cement and epoxy paint which is amount to manufacture as per Finance bill 2003. We are doing this work through job worker. Two/Three year back the internal audit officials rejected cenvat credit of Service tax on this job work on the ground that the process is amount to manufacture. There after the job Worker stop charging service tax from us. Now the audit party during the course of audit demanding service tax from the job Worker saying that he should pay service Tax. Please clarify what is the actual position

CA. BIJENDER KR. BANSAL

CA. BIJENDER KR. BANSAL (Expert)
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16 April 2010 Please find the below notification regarding service tax not required to be charged on jobwork , it such goods is returnback to manufacturer and used in final product which is excisable.

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

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