19 March 2015
FACTS in BRIEF : XYZ industries is a manufacturing concern engaged in the business of extraction of mustard oil from mustard seeds on its own account. It purchases the m.seed from open markets and local mandi. The purchased goods are unloaded from the goods carries and stocked into proper godowns. Thereafter it gets the seed, so procured, processed through expeller process and extracts refined mustard oil. After that refined oil is packed in various small and big sized packages, containers etc. and finally the packed oil is cleared from the factory under cover of sale invoices without payment of Excise duty under its brand name. On the basis of above the following is the work flow of the whole manufacturing process: 1. The Raw material (M.seed) are procured and brought through goods carrier upto factory gate. 2. At the factory gate a contractor (named “A”) takes the charge of unloading the seed bags and sacks. The same contractor deploys his labour and proper stocking in initial godown named “G1” 3. From G1, the goods are sent to G2 for properly facilitate the continuous supply of material to manufacturing process. This is also done by contactor “A”. 4. The manufacturing process starts immediately after the goods move from G to the machined conveyor system which automatically takes the chunk of seeds into the expeller machine for the mechanical manufacturing of mustard oil. For all this mechanised process it requires administration of conveyor process, for this purpose company engaged a contractor named “B” who supervise the whole process upto final stage (M.oil) 5. During the manufacturing process, the waste ( Mustard cake) is collected, packed and stocked etc by contractor “A” 6. After the Manufacturing process is completed, the refined M.oil (final product) is stored in tank and thereafter is packed in various packings by contractor name “C” 7. As and when required, C engage his labour and loads the required quantity into goods carriage for clearance from factory gate. Issues 1. Whether the contractors engaged by company at various level of manufacturing chain are liable to service tax? If yes, whether reverse charge mechanism liability would arise? 2. The above contractor B and C, In which category they fall: Job worker, supplier of man power, work contractor? 3. If the above firm wants to give its raw material ( M.seed) to another manufacturing company/firm (named PQR industries) and take in return finished goods. All labour would be of PQR and XYZ pays him crushing charges. It is all because of heavy demand and shortage in own production. In this case what would be service tax liability on both the companies? Is it treated job work in any cases? 4. What would be the service tax liabilities if XYZ takes PQR on rent( pay only rent as per agreement with TDS compliance).
19 March 2015
01. All the contractors are exigible to Service Tax. If these contractors are charging full service tax in their respective bills/invoices raised on XYZ industries, then there is no space for Reverse Charge Mechanism. If these contractors are not charging Service Tax, then Reverse Charge Mechanism will come into play.
02.They will fall under "manpower Service"
03. Crushing charges would fall under the ambit of service tax. PQR industries is responsible for paying the service tax
04. Renting of property is taxable service subject to mega exemption list (25/2012). The responsibility to pay service tax is with PQR industries.
20 March 2015
Ruling is required where there is any ambiguity. I think, there i sno ambiguity in any of above. Please let me know if you need any specific ruling.
20 March 2015
Yes sir. actually i am working in mustard oil manufacturing company.there is minimum 10-15 lacs crushing charges is paying per month. so there arise a huge service tax liability.if any escapement policy is there to save from this huge liability. due to heavy demand we have to produce oil from another manufacturer having same business near about. if ser.tax is liable on those another manufacturer,they also charges it from us (in cash or 2 no.)
20 March 2015
The provisions of service tax are quite stringent, especially with the inclusion of NEGATIVE LIST. It is very difficult to SAVE (I think you are using the word ESCAPING for SAVE) the service tax. It is always advisable to pay the Govt dues appropriately.
20 March 2015
Sir issue no.3 in above query is not falling in Job work category? and manufacturing activity in job work is falling under negative list 66D(f).
20 March 2015
IN CASE NUMBER 3....you are paying PQR industries..CRUSHING CHARGES. This is taxable under service tax. As such, the distinction of JOB work has its importance in VAT (Sales tax) and not Service tax.
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