Job Work - July11 - Idt

8/2/2019 Job Work - July11 - Idt

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CA Rajesh Kumar T R

Job Work under Central Excise


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Dictionary Meaning


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Unabridged Dictionary:

Work done by Job

Chambers Dictionary: A task, bit of work Chambers Dictionary


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Definition as per Central Excise Provisions


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Under notification 214/86 - CE

Job work means

i. Processing or working upon raw materials orsemi-finished goods

ii. Supplied to the Job workeriii. To complete a part of whole the process

iv. Resulting in manufacture or finishing of anarticle or any operation

v. Essential for the process


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Job Work under Cenvat Credit Rules

Similar definition as discussed under notification

214/86 CE dated 25.03.1986


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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 byi. Principal manufacturer

ii. Any person authorized by him


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Supreme Court on Job WorkPrestige Engineering

No new article should be manufactured i.e. Jobworker is a person contributing only labour andskill on the supplied materials.

Job Worker should return the same article afterprocessing to the customer

An activity would not be job work when job workercontributes own material with material supplied tomanufacture different goods. no new article

should be manufactured at the hand of the jobworker and he should return the same article afterprocessing to the customer


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Job work V/s Manufacture A job worker can be construed as a manufacturer

depending on the process

Process undertaken by Job Worker can eitheramount to manufacture or not

Job worker would be construed as manufacturereven though the materials are not owned by thejob worker


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Hired Labour A person who hires himself out to work for and

under control of another for wages.

Controlled and supervised by manufacturer whohires them.

A person who has no independent entity withseparate establishment unit.

However, if manufactures on own account, he

cannot be said to have hired himself out.


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Hired Labour V/s Job Work If master servant relationship or principal

agent relation exists between raw materialsupplier and job worker.

Raw material supplier would be the manufacturer


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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


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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


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Valuation upto March 2007 No specific provision in valuation rules

Valuation was based on material cost + jobcharges

The above mechanism was confirmed bySupreme Court in

Ujagar Prints V/s CCE

Pharmasia ltd

If goods are under MRP- MRP lessabatement


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Job work under service tax Job work under sec 65(19)(v) Production or

processing of goods for, or on behalf of, the

client.

Liable when process is not amounting to

manufacture

Exempt from tax when:

Results in manufacture of excisable goods

Undertaken under Cenvat provisions


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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 backfor further processing

Goods can also be dispatched directly from placeof job work subject to permission fromcommissioner

These are independent of exemption providedunder notification 214/86


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Goods should be returned within 180 days afterjob work

Provision applies whether or not job workundertaken 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 canbe sent

Exemption is available even if the activity resultsin intermediate product

Exemption is available subject to the declaration

to be filed with the jurisdictional officer of jobworker


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Job worker would be exempt from all duties andcess subject to undertaking from principalmanufacturer

No time limit has been prescribed for return of

goods

Some inputs are excluded from provisions of thenotification


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Job work for SSI unitsAs they dont pay duty, goods cannot be sent

under cenvat provision

SSI unit has to file a declaration to AC that goodsafter job work will be used in factory for

manufacture of products exempt from duty

SSI unit is also required to file another declarationto AC of job worker that goods will be used afterjob work


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Exemption is available only for goods covered bySSI 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 Commissionerof Central Excise


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Removal of semi-finished goodsRule 16B

The manufacturer subject to conditions ofCommissioner can remove semi-finished goods

The removal should be for carrying outmanufacturing process


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Sp. Procedure for excisable goodsRule 16C

A manufacturer with specific permission canremove excisable goods

For carrying out test or any process notamounting to manufacture

The provision doesnt apply to proto type sent outfor 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 property

Where there is transfer of property VAT wouldbe applicable

Works contract is a contract for work i.e. itinvolves use of both material and labour

The tax can be levied only on the goods involved

in the contract and not on contract


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If the job work transaction involves use or transferof material, job worker would be liable for VAT


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Job Work - July11 - Idt

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