JOB WORK ?

X, Y & Z are all different legal entities.

As X, a foreign company will provide know how to Z, and Z will pay royalty; Z is required to pay sevice tax under reverse charge method on the royalty paid.

Z is the manufacturer. X is merely a brand name owner, he is not the manufacturer.

When Z is sending the raw material to Y for manufacture, for excise purposes Y will be the manufacturer as he is doing the manufacturing. Since Z is registered as trader, he cannot send the material to Y either under 57F4 challan or claim exemption for job worker under Notification 214/86. After receipt of the material he can pack the goods in X's cartons. Check whether the packing amounts to deemed manufacture or not?

The term job work has not been defined anywhere. However, in commerce parlance it is known as doing some activity on the raw material suplied by some other person. On this view Y is the job worker as he is doing the work on the material supplied by X. Nevertheless, Y will not get any job work exemption, and required to pay duty as Z is not registered as trader and cannot take responsibility of duty payment.

Dear Rajesh,

Thanks for reply.

In Excise, the person who does the activity of manufacture is manufacturer. It is possible that activity done by both, Y & Z amounts to manufacture, and both are manufacturers. If the product is covered in the thisrd schedule, or attract some chapter note of deemed manufacture, the activity of packing by X will amounts to manufacture, and X will be a manufacturer.

Y is working on the material supplied by X. Thus if X is registered as manufacturer, he may send the material to Y on 57F4 challan, and Y may take the benefit of exemption to job worker. If however, X is not registered as manufacturer, Y has to pay duty.

Further, you also have to take care of service tax on job work under business auxiliary service.