input service credit on job work

hardeep (Querist) 24 May 2011 This query is : Resolved
Dear Sir,

We are manufacturer cum merchant exporter of auto parts. We are procuring excisable goods without payment of central excise duty against CT-1 Bond in our factory. The B-1 bond is opened by us.
The supplier is supplying us goods against this CT-1 Bond under ARE-1 form for export only. The supplier is a manufacturer and registered with central excise deppt and have no facility of galvanization/zinc plating in his unit.

Our overseas customer required these goods zinc plated. We are getting these goods zinc plated from a job worker who is charging us Service tax.

Please intimate, can we take credit of this service tax amount as a input service cenvat credit in our books.

Please reply and oblige.

Very thanks.
Hardeep

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R.Ramachandran (Expert) 24 May 2011
Once the job worker has charged "service tax" and if you had paid it, you can take credit of the same.

However, the matter has another angle, which you should understand.

According to Section 2(f)(iii) of the Central Excise Act, 1944, "manufacture" includes any process 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"

In the instant case, you are adopting the process of galvanising the goods to make it marketable. As such, it would amount to manufacture. If any activity amounts to manufacture, then the question of payment of any "service tax" on such activity does not arise.

Further, since you are not exporting the same goods as you procure from your supplier, it would be advisable if you procure the said goods under Notification 43/2001-CE as "inputs" for manufacture of goods for export, without payment of duty. After getting the said goods galvanised on job work basis by following the procedure prescribed under Notification 214/86, you can export the goods.