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Service tax on hal

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Jothi

Elastomeric Engineers-Admin Manager

42 Points Posted on 28 December 2011

Dear All

We are undertaking Job work for HAL Job work carried out to HAL are exmpted under Central Excise notification No.70/92CE. Items manufactured by HAL (Final Product) are supplied to defence are exempted from payment of Central Excise duty. Job work carried out by us are in the nature of manufacture as defined under section 2(F) of Central Excise Act.

Since the final product are cleared under NIL/ Exempted rate of Central Excise Duty are we liable to pay service tax on job work carried out by us as per Service Tax Notification No.8/2005 ST, Kindly Clarify

Replies (1)

CA Prabhat Gupta

Manager (Indirect Taxes)

644 Points Posted on 29 December 2011

Please refer to Explanation 1 of GENERAL EXEMPTION NO. 26 on Exemption to goods manufactured in a factory on job work for use by specified undertakings who supply final goods to the Ministry of Defence. [Notifn. No.70/92-CE dt.17.6.1992 as amended by Notifn. Nos. 140/94, 66/95, 96/95 and 7/98]. The same is produced below for ready reference:

"Explanation I - For the purposes of this notification, the expression "job work means procesing or working upon of raw materials or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for the aforesaid process."

While referring to the Explanations given in Notification no.8/2005 it seems that Service amounting to manufacture & cases where final goods are exempt are specifically excluded. Hence Service Tax would have to be paid.