Any process amounting to manufacture or production of goods - Service Tax Practice Manual / Ready Reckoner - Service Tax

Chapter 6 Any process amounting to manufacture or production of goods Effective date: 1.7.2012 Scope of Negative Service Section 66D(f) From 1.7.2012 to 31.5.2015 Any process amounting to manufacture or production of goods From 1.6.2015 Services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption; Notes: For Amendment w.e.f. 1.6.2015 The entry in the Negative List that covers service by way of any process amounting to manufacture or production of goods [ section 66D (f) ] is being pruned to exclude any service by way of carrying out any processes for production or manufacture of alcoholic liquor for human consumption. Consequently, Service Tax shall be levied on contract manufacturing/job work for production of potable liquor for a consideration. In this context, the definition of the term process amounting to manufacture or production of goods [ section 65 B (40) ] is also being amended, along with the Negative List entry [ section 66D (f)] , with a consequential amendment in S. No. 30 of notification No. 25/12-ST , to exclude intermediate production of alcoholic liquor. Consequent to imposition of Service Tax levy on service by way of manufacture of alcoholic liquor for human consumption, an amendment is being made in the entry at S. No. 30 of notification No. 25/12-ST to exclude carrying out of intermediate production process of alcoholic liquor for human consumption on job work from this entry. Meanings and Definitions: Section 65B (40) - process amounting to manufacture or production of goods means a process on which duties of excise are leviable under section 3 of the Central Excise Act, 1944 (1 of 1944.) or the Medicinal and Toilet Preparations (Excise Duties) Act, 1955 or any process amounting to manufacture of alcoholic liquors for human consumption, opium, Indian hemp and other narcotic drugs and narcotics on which duties of excise are leviable under any State Act for the time being in force; There may be a case where excise duty is leviable on a process but such process is exempted from excise duty. Whether it will be covered in above definition or not. In the case of Peekay Re-Rolling Mill (P) Ltd v. Assistant Commissioner 2007 (3) TMI 356 - SUPREME COURT OF INDIA held that exemption follows after levy and exemption does not negate liability of tax. It further observed that exemption can only operate when there has been a valid levy, if there is no levy at all, there would be nothing to exempt. Job work Above definition covers manufacturing activity carried out on contract or job work basis, which does not involve transfer of title in goods, provided duties of excise are leviable on such processes under the Central Excise Act, 1944 or any of the State Acts. A specific exemption has been provided in Notification no. 25/2012-ST, dated 20-6-2012 in relation to carrying out an intermediate production process as job work in relation to specified goods. Section 65B (25) - goods means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale; Section 65B(1) - actionable claim shall have the meaning assigned to it in section 3 of the Transfer of Property Act, 1882; Section 65B(33) - money means Indian legal tender, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any such similar instrument when used as consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value; Section 65B(43) - securities has the meaning assigned to it in clause (h) of section 2 of the Securities Contract (Regulation) Act, 1956; (42 of 1956.) Clarification by the Board (Taxation Guide Guidance Note 4 Exemptions dated 20.06.2012) 4.6.1 Would service tax be leviable on processes which do not amount to manufacture or production of goods? Yes. Service tax would be levied on processes, unless otherwise specified in the negative list, not amounting to manufacture or production of goods carried out by a person for another for consideration. 4.6.2 Would service tax be leviable on processes on which Central Excise Duty is leviable under the Central Excise Act, 1944 but are otherwise exempted? No. If Central Excise duty is leviable on a particular process, as the same amounts to manufacture, then such process would be covered in the negative list even if there is a central excise duty exemption for such process. However if central excise duty is wrongly paid on a certain process, with or without an intended benefit, it will not save the process on this ground.