[size=14][b]FACTS OF THE CASE[/b]
KCR is doing job processing on behalf of OMN. Raw material is supplied by OMN to KCR and finished goods are being returned to OMN. This is as per job processing agreement entered into between KCR and OMN. OMN is exporting the goods directly from the premises of KCR. There is no local sales is involved. The goods being manufactured by KCR on job processing basis are excisable under chapter 13 of First Schedule.
KCR is charging service tax on the job processing charges payable by OMN, under the category Business Auxiliary Services.
[b]QUERRY[/b]
1. Whether the transaction entered into and executed by KCR is right?
2. Whether there is any applicability of Excise Duty in the above transaction?[/size]
It is common for Industries to get some processing done from outside on job work basis. Job work means supplying the material by a Customer (often a Large Scale Unit) to a job worker who carries out certain processes [like machining, drilling, welding, painting etc. for engineering goods; bleaching, dyeing, printing etc. in textiles etc.], and returns the material to the customer after carrying out the processes. This is particularly common in Engineering and textile Industries. This is usually called ‘job work’ or ‘sub-contracting’ in engineering industry and ‘processing’ in chemical or textile industry. In drug industry, a system of ‘loan licensee’ is in vogue, where one unit gets the drugs manufactured from another small unit under his own brand name by supplying the raw material.
[b]Duty liability of goods manufactured under job work - [/b]
Since excise duty is on ‘manufacture’, duty liability arises only when the goods are manufactured during job work. Thus, if an item is only repaired or reconditioned, no duty liability arises as no new product emerges. Similarly, if some operation is carried out which does not amount to manufacture, there is no duty liability. [b]However, if goods are manufactured during job work, excise liability will arise, as duty is on manufacture and who has supplied the raw material is immaterial[/b].
HERE U HAVE NOT MENTIONED WEATHER KMN IS MANUFACTURING ANYTHING OR NOT , IF it is the chaging of service tax is wrong at law since manufacturing is done.
CAclubindia
