Job Work under Central Excise

Report
Indirect Tax Certification Course Central Excise
Rajesh Kumar T.R.
B’com, LLB, FCA, DISA
1
Revenue from different streams of
taxes
2
Nature of tax
Revised
Estimates
2011-12
Shortfall/
Excess
Corporate tax
3,59,990
3,27,680
-32,310
Income tax
1,72,026
1,71,879
-147
Wealth tax
635
1,092
457
1,973
2,317
344
Customs
1,51,700
1,53,000
1,300
Union Excise Duties
1,64,116
1,50,696
-13,420
82,000
95,000
13,000
9,32,440
9,01,664
-30,776
Taxes of Union Territories
Service Tax
Total
3
Budget
Estimates
2011-12
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
Corporation
tax
Income tax
Wealth tax
Taxes of
Union
Territories
Customs
Union Excise
Duties
Service Tax
373,227
195,786
1,244
2,311
186,694
194,350
124,000
2012-13
Indirect Tax Revenues
INR
Crore
Customs
186,694
Union Excise Duties
194,350
Service Tax
Total indirect tax revenue
4
Other Tax Revenues
Taxes of Union Territories/ Others
INR Crore
3,555
Income tax
195,786
124,000
Corporate tax
373,227
505,044
Total direct & other duties
572,568
Constitutional Aspects of Taxation
5
Part XII – Finance, Property, Contracts
and Suits
Article 265 of the Constitution of India
- No tax shall be levied or collected
without the authority of law
6
Part XI – Relation Btwn Union – States 245
 Parliament Make Laws – Whole or any part
of the Territory of India
 State Legislature – Whole or any part of the
State
 No law made by Parliament shall be deemed
to be invalid on the ground that it would
have extra-territorial operation
7
Article 246
 Parliament has exclusive power to make
laws of matters covered in List I (union List)
of VII Schedule
 State Legislature has exclusive power to
make laws of matters covered in List II
(State List)
 Concurrent List – Both have powers
8
Seventh Schedule
Union List- List -I
 Entry 83. Duties of customs including export
duties.
 Entry 84. Duties of excise on tobacco and other
goods manufactured or produced in India
except (a) alcoholic liquors for human consumption;
 (b) opium, Indian hemp and other narcotic
drugs and narcotics,
but including medicinal and toilet preparations
containing alcohol or any substance included in
sub-paragraph (b) of this entry.
 Entry 92C – Taxes on Services
 Entry 97 - Any other matter not enumerated in
List II or List III including any tax not
mentioned in either of those lists.
9
State List- List - II
 Entry 51. Duties of excise on the following
goods manufactured or produced in the State
and countervailing duties at the same or lower
rates on similar goods manufactured or
produced elsewhere in India: (a) alcoholic liquors for human consumption;
 (b) opium, Indian hemp and other narcotic
drugs and narcotics,
but not including medicinal and toilet
preparations containing alcohol or any
substance included in sub-paragraph (b) of
this entry.
 Entry 54. Taxes on the sale or purchase of
goods other than newspapers, subject to the
provisions of entry 92A of List I.
Entry 84 of Union List
 Duties of excise on tobacco and other goods manufactured or
produced in India except:
 alcoholic liquors for human consumption;
 opium, Indian hemp and other drugs and narcotics,
 but including medicinal and toilet preparations containing alcohol or
any substance including in sub-paragraph (b) of this entry (eg. Medical
syrups for cold/cough)
10
Entry 51 of state list
 Duties of excise on the following goods manufactured or
produced in the State and countervailing duties at the same
or lower rates on similar goods manufactured or produced
elsewhere in India: alcoholic liquors for human consumption
 opium, Indian hemp and other narcotic drugs and narcotics
 but
not including medicinal and toilet preparations
containing alcohol or any substance included in subparagraph (b) of this entry
11
Entry 97 of Union List
 any other matter not included in List II, III and any tax not
mentioned in list II or III
 This is residuary powers within the hands of Union.
 Challenge of levy of any new Central tax, has to pass the test
of proving that it is beyond this residuary powers irrespective
of what the tax is named/characterised as.
12
Basic Elements of Taxation
 Levy –Will define the event upon which the duty/tax gets
attracted
 Assessment – Quantification of the levy attracted
 Collection – The mechanism by which the Governments
would collect the assessed tax
13
Levy and collection
 Levy – collection – meaning
 Somaiya Organics Ltd Vs State of UP, 2001 (130) ELT 3
(SC) – the word collection in Art.265 would mean physical
realization of tax, which is levied or imposed. Levy and
collect are not synonymous terms. Levy means assessment
or charging or imposition of tax, collect means physical
realization.
14
Tax
 Art.366(28) of Const. of India – Taxation includes the
imposition of any tax or impost, whether general or local or
special, and ‘tax’ shall be construed accordingly.
15
What is Direct Tax
 The Central Board of Revenue Act, 1963 defines ‘direct tax’ to
mean any duty leviable or tax chargeable under Estate Duty Act,
1953, Wealth-tax Act, 1957, Expenditure Tax Act, 1957, Gift Tax
Act, 1958, Income-tax Act, 1961, Super Profits Tax Act, 1963,
Interest Tax Act, 1974, Hotel Receipts Tax Act, 1980, and any
other duty or tax which, having regard to its nature or incidence,
may be declared by the Central Government, by notification in
the official gazette to be a direct tax.
16
Court’s views
 Eri Beach Company Ltd Vs Attorney General of
Ontario, AIR 1930 PC 10
 direct tax is one which is demanded from the very person
who it is intended or desired should pay it. Indirect taxes are
those which are demanded from one person in the
expectation and intention that he shall indemnify himself at
the expense of another.
17
Introduction to Central Excise Law
18
Sources of CE law
 Central Excise Act, 1944
 Rules
 CE Rules, 2002,
 Cenvat Credit Rules, 2004,
 CE (Appeal) Rules, 2001,
 CE (Advance Rulings) Rules, 2002,
 CE (Settlement of cases) Rules, 2007,
 CE (Removal of Goods at Concessional Rate of duty for manufacture of
excisable goods) Rules, 2001,
19
Sources of CE law
 CE Valuation (Determination of Price of Excisable Goods) Rules,
2000,
 CE (Compounding of Offences) Rules, 2005,
 CE (Determination of Retails Sale Price of Excisable Goods) Rules
2008
 Central Excise Tariff Act, 1985
 Notifications
 Case laws and Circulars
20
Charging/Levy Section - 3
 There shall be levied and collected in such manner as may be




21
prescribed
a duty of excise to be called the Central Value Added Tax
(CENVAT)
on all excisable goods
(excluding goods produced or manufactured in special
economic zones)]
which are produced or manufactured in India as, and at the
rates, set forth in the First Schedule and Second Schedule to
the Central Excise Tariff Act, 1985
Elements of Levy
 Production/Manufacture
 In India
 Of Goods
 Excisable (Set out in 1st & 2nd Sch. To CETA subjected to
duty)
22
Sec. 3 – Other Aspects
 Goods Manufactured in EOU and brought to other
place in India
 Duties of Excise to be paid
 Amount equal to
 the aggregate of the duties of customs which would be
leviable on like goods produced or manufactured
outside India if imported into India.
 Valuation would be based on Customs
 Goods Manufactured by or on behalf of Government
would be same like any other Mfr.
 Power to fix Tariff values to C.G.
23
Manufacture – Definition – 2(f)
“
Manufacture” includes any process,  i)
incidental or ancillary to the completion of a
manufactured product; AND
 ii)
which is specified in relation to any goods in the
Section or Chapter notes of the First Schedule to the
Central Excise Tariff Act, 1985 (5 of 1986) as amounting
to manufacture; OR
24
Manufacture – Definition – 2(f)

iii) which, in relation to the goods specified in the Third Schedule,
involves packing or repacking of such goods in a unit container or
labelling or re-labelling of containers including the declaration or
alteration of retail sale price on it or adoption of any other treatment on
the goods to render the product marketable to the consumer
and the word “manufacturer” shall be construed accordingly and shall include
not only a person who employs hired labour in the production or
manufacture of excisable goods, but also any person who engages in their
production or manufacture on his own account;
25
Manufacture - analysis
 Definition starts with the word “includes”
 3 limbs in the definition
 2nd and 3rd limb – “Deemed manufacture”
26
Manufacture
 UOI Vs Delhi Cloth & General Mills Co.ltd, 1977 (1) ELT J.199 (SC)
– manufacture implies a change, but every change is not manufacture
and yet change of an article is the result of treatment, labour and
manipulation. But something is necessary and there must be
transformation; a new and different article must emerge having a
distinctive name and character or use. Also see South Bihar Sugar
Mills ltd Vs UOI, 1978 (2) ELT J.336 (SC).
27
Manufacture
 Empire Industries ltd Vs UOI, 1985 (20) ELT 1 (SC) – to constitute
manufacture it is not necessary that one should absolutely make out a
new thing because it is well settled that one cannot absolutely make a
thing by hand in the sense that nobody can create matter by hand
(scientifically). It is transformation of matter into something else
that would amount to manufacture. That something is a question of
degree.
28
Manufacture
 What comes out after processing is a different commercial
commodity having its distinct character, use and name and is
commercially known as such, is an important consideration
in determining whether there is a manufacture.
29
Manufacture
 UOI Vs Parle Products, 1994 (74) ELT 492 (SC) - Whether
or not something results in manufacture would depend on
the facts of the case but any number of processes undertaken
which do not result in a commercially different commodity
cannot result in manufacture.
30
Manufacture
 Ujagar Prints Vs UOI, 1988 (38) ELT 535 (SC) – Prevalent and
generally accepted test to ascertain whether there was manufacture
was whether the change or the series of changes brought by
application of processes take the commodity to the point where,
commodity can no longer be regarded as the original commodity but
is, instead, recognised as a distinct and new article that has emerged
because of the result of the processes.
31
Manufacture
 There might be borderline cases where either conclusion can
be reached with equal justification. Insistence on any sharp or
intrinsic distinction between processing and manufacture
results in an over simplification of both and tends to blur
their interdependence in cases.
32
Manufacture - processes
 Manufacture involves a series of processes.
 A process is one of the activities undertaken for manufacture
of a product from input materials.
33
Process amounting to Manufacture
 Conversion of jumbo rolls of photographic films into small
flats and rolls in the desired sizes – Indian Cine Agencies Vs
CIT
 Purification and filtration done to product hydrochloric acid
and sulphuric acid marketable in the international market –
CCExVs Alok Enterprises
34
Processes not amounting to
Manufacture
 Process of slitting and cutting of steel sheets and polyester films, which
are used for lamination, as the resultant product was not having
different character, name and use.
 Pickling and oiling of metals as preparatory steps does not amount to
manufacture – Circular 927/17/2010 – deemed in 2012
 Process of cleaning “used mobil oil doesn’t amount to manufacture as
no new commercial commodity comes into existance.
35
Manufacture vs production
 Dictionary meaning of ‘produce’ – to bring forward, to bring forth or
out, to bring (to a specified condition), to bring into existence or
being, to work up from raw material, manufacture (material) objects.
 Hyderabad Asbestos Ltd Vs UOI, 1980 ELT 735 – manufactured and
produced were synonymous – same test should be applied.
 Produced used in respect of natural items.
36
Deemed manufacture
 Processes which may not amount to manufacture in their natural
meaning
 Brought under tax ambit by the artificial definition
 Processes mentioned in CETA as manufacture
 Third schedule in CETA – repacking, re-labelling, putting or
altering retail sale price etc. – mostly consumer goods.
37
Deemed Manufacture 2(f)(ii)
 Processes which are specified in relation to any goods in the
Section Notes or Chapter Notes to the First Schedule to CETA;
 Mere specification of a process in the Tairff entry not sufficient;
 Should be specifically stated that the process amounts to
manufacture.
38
Deemed Manufacture 2(f)(ii) –
Example
39
Chapter / Section
Notes for
Processes amounting to Deemed Manufacture
Ores, Slag and Ash
Process of converting ores into concentrate
Marble, Granite,
sandstone, etc
Process of cutting or sawing or sizing or polishing of blocks or any
other process of converting stone blocks into slabs or tiles
Aluminium Tubes &
Pipe
The process of drawing or redrawing
Iron and Steel
Process of drawing or redrawing a bar, rod, wire rod, round bar or any
other similar article into bright bar.
Process of galvanization
Beverage, Spirit and
Vinegar
Labelling or relabelling of containers, or, packing or repacking from
bulk packs to retail packs, or, adoption of any other treatment to
render the product marketable to the consumer
Deemed Manufacture 2(f)(ii) –
Example
Chapter / Section
Notes for
Processes amounting to Deemed Manufacture
Misc edible preparations
Labelling or re-labelling of containers or re-packing from bulk
packs to retail packs of pan masala, yeast, sauces, extracts from
tea/coffee shall amount to manufacture
Made up textile articles;
Affixing brand name, labelling or re-labelling or repacking from
sets; worn clothing & worn bulk pack to small pack of readymade garments (Articles of
textile articles; rags
Apparel) is manufacture
40
Natural or coloured pearl;
precious or semi precious
stones; precious metals;
Imitation jewellery; Coin
Process of refining dore bar
Sound recorders and
reproducers
Recording of sound or other phenomena on audio or video tapes
shall amount to manufacture
Deemed manufacture 2(f)(iii)
 Goods specified in Third Schedule to CETA
 Packing or repacking in a unit container
 Labelling or re-labelling of containers including the
declaration or alteration of retail sale price on the container
or
 Adoption of any other treatment on the goods to render the
product marketable to consumer.
41
Deemed manufacture 2(f)(iii)
 Air Liquide North India Pvt. Ltd. Vs CCEx. [2011] 271 ELT
321 (SC)
 Relabeling and repacking of gas in small cylinders
 Helium gas rendered marketable to ultimate consumers thereof
 Amounts to manufacture
42
Manufacturer
 Person who carries on the activity of manufacture.
 Job worker
 Brand owner not manufacturer – Cibatul Ltd Vs UOI, 1978
(22) ELT 302 (SC) – principal to principal basis.
 Should not be dummy.
43
Goods
 Art.366(12) – Goods include all materials, commodities and
articles.
 Sale of Goods Act, 1930 – section 2(7) – Goods – every kind of
moveable property other than actionable claims and money; and
includes stocks and shares, growing crops, grass and things
attached to and forming part of the land which are agreed to be
severed before sale or under the contract of sale.
44
Goods
 UOI Vs Delhi Cloth Mills, 1997 (1) ELT J.199 (SC), - in
order to be goods, the articles must be capable of coming to
the market to be bought and sold. Therefore the items must
be moveable and marketable.
45
Goods
 Moveability:
 DCM case
 South Bihar Sugar Mills Vs UOI, 1978 ELT J.336 (SC)
The articles must be something, which can ordinarily
come or can be bought to the market to be bought
and sold. As opposed to moveable goods, immoveable
property cannot be brought to the market to be sold.
46
Goods
 Section 3(36) GC Act, 1897 – moveable goods mean
property of every description except immovable
property
 Section 3(26) GC Act, 1897 – immoveable property
shall include land, benefits to arise out of land, and
things attached to the earth or permanently fastened to
anything attached to the earth.
47
Goods
 Marketability:
 Capability of a product of being put into the market for sale.
 Union Carbide India ltd Vs UOI, 1986 (24) ELT 169 (SC) – An article
must be something which can ordinarily come to the market to be
bought and sold. Articles in crude or elementary form are not
dutiable as they are merely intermediary products and not goods.
Aluminum cans or torch bodies produced by extrusion process –
neither sold nor marketable – not goods.
48
Goods
 CCE Vs Ambalal Sarabhai Enterprises, 1989 (43) ELT 214 (SC) –
Duty of excise is on the manufacture of goods and for an article to
be goods, it must be known in the market as such or must be
capable of being sold in the market as goods. Actual sale is not
necessary. Usage in captive consumption is not determinative of
whether the article is capable of being sold in the market or is
known in the market as goods.
49
Goods
 Even transient items/articles can be goods, provided
they are known in the market as distinct and separate
articles, having separate uses. Thus, goods with unstable
character can be theoretically marketable if there was a
market for such transient types of articles, but one has to
be take a practical view on the basis of available
evidence.
50
Goods
 Bhor Industries Ltd Vs CCE, 1989 (40) ELT 280 (SC) –
Merely because an article is specified under the Tariff, it
would not be correct to state that it is chargeable to
duty, unless it is proved that the goods are
marketable. See also Ion Exchange India Ltd Vs CCE,
1999 (112) ELT 746 (SC)
51
Goods
 Number of purchasers not relevant.
 Does not confine to territorial limits of India.
 The fact that goods are not actually marketed is of no
relevance nor is it necessary that the goods in question
should be generally available in the market.
 APSEB case.
52
Excisable goods
 Section 2 (d) of CE Act – it means goods specified in the
First and Second Schedules to the CE Tariff Act, 1985 as
being subject to a duty of excise and includes salt.
 Explanation – Goods include any article, material or
substance which is capable of being bought and sold for a
consideration and such goods shall be deemed to be
marketable. (2008 amendment)
53
Excisable goods
 CETA – 1st and 2nd schedule
 Section wise – each section has chapters – each chapter –
heading/sub-heading.
 Tough mentioned in the said schedules, but with Blank at the
rate column, not excisable goods
54
Point of levy & Collection
 Levy is on Manufacture,
 Collection is postponed as set out in Rules
 If levy attracted on the activity, the assessment would be
based on removal
 CCE Vs. Vazir Sultan Tobacco Co. Ltd. 1996 (83) ELT (SC)
 Wallace Flour Mills Ltd Vs CCE, 1989 (44) ELT 598 (SC) &
UOI Vs Nandi Printers P.Ltd, 2001 (127) ELT 645 (SC).
55
Nature of Excise duty
 Court’s views:
 The Province of Madras Vs Boddu Paidanna & Sons, 1978 (2) ELT
J.272 (FC):
“ Duties of excise were on manufacture or production of an
article and although the expression “duty of excise” was wide
enough to include sales tax, in view of the power expressly
given to another authority to levy a sales tax, the said expression
must be given a more restricted meaning than it might
otherwise bear.
56
Court’s views
 In appeal before the Privy Council in Governor General
in Council Vs Province of Madras, 1978 (2) ELT J.280
(PC) – Excise was primarily a duty levied upon a
manufacturer
producer
on
the
commodity
manufactured or produced.
 Tax on goods and not on sales or sale proceeds.
57
Court’s views
 There was no overlapping of excise duty and sales tax.
 R.C.Jall Parsi and Ors Vs UOI, AIR 1962 SC 1281 – Excise duty is
primarily a duty on production or manufacture of goods within the
country.
 It is an indirect duty passed on to ultimate customer.
 Ultimate incidence will always be on the customer. Can be levied at any
convenient stage.
58
Court’s views
 CCE Vs Acer India Ltd, 2004 (172) ELT 289 (SC) – Duty of excise is a
tax upon goods and not sale or proceeds thereof. Taxable event is
manufacture or production.
59
Court’s views
 UOI Vs Bombay Tyres International, 1983 (14) ELT
1896 (SC):
Ultimate incidence of an excise duty, a typical indirect
tax, must always be on the consumer, who pays as he
consumes or expends and it continues to be an excise
duty on homemade goods, no matter at what stage it is
collected.
60
Removal of Goods
61
Rule 4 - Removal
 RULE 4.
Duty payable on removal. — (1) Every person who produces
or manufactures any excisable goods, or who stores such goods in a warehouse,
shall pay the duty leviable on such goods in the manner provided in rule 8 or
under any other law, and no excisable goods, on which any duty is payable, shall
be removed without payment of duty from any place, where they are produced
or manufactured, or from a warehouse, unless otherwise provided :
 [(1A) Notwithstanding anything contained in sub-rule (1), every person who
gets the goods, falling under Chapter 61 or 62 or 63 of the First Schedule to the
Tariff Act, produced or manufactured on his account on job work, shall pay the
duty leviable on such goods, at such time and in such manner as is provided
under these rules, as if such goods have been manufactured by such person :
 Provided that where any person had, instead of paying duty, authorized job
worker to pay the duty leviable on goods manufactured in his behalf under the
provisions of sub-rule (1A) as it stood prior to the publication of this
notification, he shall be allowed to obtain registration and comply with the
provisions of these rules within a period of thirty days from the date of
publication of this notification in the Official Gazette.].
62
Rule 4 - Removal
 (2) Notwithstanding anything contained in sub-rule (1), where molasses
are produced in a khandsari sugar factory, the person who procures such
molasses, whether directly from such factory or otherwise, for use in the
manufacture of any commodity, whether or not excisable, shall pay the
duty leviable on such molasses, in the same manner as if such molasses
have been produced by the procurer.
 [(3) *
*
* ]
 (4) Notwithstanding anything contained in sub-rule (1),
Commissioner may, in exceptional circumstances having regard to the
nature of the goods and shortage of storage space at the premises of the
manufacturer where the goods are made, permit a manufacturer to store
his goods in any other place outside such premises, without payment of
duty subject to such conditions as he may specify.
63
Rule 5 Date for determination
 RULE 5.
Date for determination of duty and tariff
valuation. — (1) The rate of duty or tariff value applicable
to any excisable goods, other than khandsari molasses, shall
be the rate or value in force on the date when such goods are
removed from a factory or a warehouse, as the case may be.
 (2) The rate of duty in the case of khandsari molasses, shall
be the rate in force on the date of receipt of such molasses in
the factory of the procurer of such molasses.
 Explanation. - If any excisable goods are used within the
factory, ‘the date of removal of such goods’ shall mean the
date on which the goods are issued for such use.
64
Job Work under Central Excise
65
Dictionary Meaning
Unabridged Dictionary:
 Work done by Job
Chambers Dictionary:
 A task, bit of work – Chambers Dictionary
66
Under notification 214/86 - CE
Job work means
i.
Processing or working upon raw materials or semi-finished
goods
ii. Supplied to the Job worker
iii. To complete a part of whole the process
iv. Resulting in manufacture or finishing of an article or any
operation
v. Essential for the process
67
Job Work under Cenvat Credit Rules
Similar definition as discussed under notification 214/86 – CE
dated 25.03.1986
68
Job Work under Valuation Rules
Job Worker means a person
i.
Engaged in the manufacture or production
ii. On behalf of the Principal manufacturer
iii. From inputs and capital goods supplied by
i.
ii.
69
Principal manufacturer
Any person authorized by him
Supreme Court on Job Work – Prestige
Engineering
 No new article should be manufactured i.e. Job worker is a
person contributing only labour and skill on the supplied
materials.
 Job Worker should return the same article after processing to
the customer
 An activity would not be job work when job worker
contributes own material with material supplied to
manufacture different goods. no new article should be
manufactured at the hand of the job worker and he should
return the same article after processing to the customer
70
Job work V/s Manufacture
 A job worker can be construed as a manufacturer depending
on the process
 Process undertaken by Job Worker can either amount to
manufacture or not
 Job worker would be construed as manufacturer even though
the materials are not owned by the job worker
71
Hired Labour
 A person who hires himself out to work for and under
control of another for wages.
 Controlled and supervised by manufacturer who hires them.
 A person who has no independent entity with separate
establishment unit.
 However, if manufactures on own account, he cannot be said
to have hired himself out.
72
Hired Labour V/s Job Work
 If master – servant relationship or principal – agent relation
exists between raw material supplier and job worker.
 Raw material supplier would be the manufacturer
73
Valuation under Job work
 Excise duty in hands of job worker is not payable if materials
/ semi-finished goods are sent under:
 Notification 214/86 – CE
 Cenvat Credit Provisions
74
Rule 10A of Valuation Rules
 This provision provides that
 Where goods are manufactured by job worker
 On behalf of principal manufacturer
 Duty would be payable on the sale value at which principal
manufacturer sells the goods
 Sold from factory: transaction value
 Sold from depot: Normal transaction value
 Price is not sole consideration: Rule 6 of valuation rules
 For consumption by sister units: Rule 8 of valuation rules
75
Valuation upto March 2007
 No specific provision in valuation rules
 Valuation was based on material cost + job charges
 The above mechanism was confirmed by Supreme Court in
 Ujagar Prints V/s CCE
 Pharmasia ltd
If goods are under MRP- MRP less abatement
76
Job work under service tax
 Job work under sec 65(19)(v) – Production or processing of
goods for, or on behalf of, the client. (prior to 01.07.2012)
 After 01.07.2012 – gets covered under service definition and
is liable when process is not amounting to manufacture
 Exempted by Notification No. 25/2012-ST if :
 It is intermediate process as job work; and
 Person sending the goods would pay appropriate duty on final
products.
77
Exemptions
 Exemptions from payment of duty when:
 Job work is under Cenvat provisions
 Job work under notification 214/86
 Job work for SSI units
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Job Work under Cenvat
 Rule 4(5)(a) allows manufacturer to send materials for job
work.
 The goods after processing can be brought back for further
processing
 Goods can also be dispatched directly from place of job work
subject to permission from commissioner
 These are independent of exemption provided under
notification 214/86
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Job Work under Cenvat – Contd.
 Goods should be returned within 180 days after job work
 Provision applies whether or not job work undertaken
amounts to manufacture
 Any input can be sent under the said provision
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Job work under notification 214/86
 This notification was issued to grant exemption from job
work amounting to manufacture
 Both raw material and semi-finished goods can be sent
 Exemption is available even if the activity results in
intermediate product
 Exemption is available subject to the declaration to be filed
with the jurisdictional officer of job worker
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Job work under notification 214/86
 Job worker would be exempt from all duties and cess subject
to undertaking from principal manufacturer
 No time limit has been prescribed for return of goods
 Some inputs are excluded from provisions of the notification
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Job work for SSI units
 As they don’t pay duty, goods cannot be sent under cenvat
provision
 SSI unit has to file a declaration to AC that goods after job
work will be used in factory for manufacture of products
exempt from duty
 SSI unit is also required to file another declaration to AC of
job worker that goods will be used after job work
 Exemption is available only for goods covered by SSI
exemption
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Other removals
 Rule 16A allows for removal of:
 Inputs received in factory
 As such or after partially processed
 For further processing, testing, repair, re-conditioning
 Fulfillment of conditions specified by Commissioner of Central
Excise
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Removal of semi-finished goods – Rule
16B
 The manufacturer subject to conditions of Commissioner can
remove semi-finished goods
 The removal should be for carrying out manufacturing
process
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Sp. Procedure for excisable goods –
Rule 16C
 A manufacturer with specific permission can remove
excisable goods
 For carrying out test or any process not amounting to
manufacture
 The provision doesn’t apply to proto type sent out for trial
and development
 Conditions as specified in permission will have to be followed
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Job Work V/s Works Contract - VAT
 A pure job work not liable to VAT i.e. there is no transfer of




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property
Where there is transfer of property – VAT would be
applicable
Works contract is a contract for work i.e. it involves use of
both material and labour
The tax can be levied only on the goods involved in the
contract and not on contract
If the job work transaction involves use or transfer of
material, job worker would be liable for VAT
Questions????
[email protected]
[email protected]
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