Excise Duty on Capital Goods, Service Tax

[Ashok Chopra]

Respected Forum,

1.    I am 100 percent EOU at place A.  as manufacturer and also Powder Coating Unit at Place B. as  Service Provider

2.   My service tax registration is one, both the places are shown in Registration and Nature of Services mention as GTA for manufacturing Unit.   And for Powder Coating Nature of Service is mentioned as Business Auxillary Service.

3. I am filing one Service Tax Return and Balance Sheet is one.

4. After getting my unit of Powder Coating registered in Service Tax as B.A.S , I have taken credit of CENVAT on capital goods for Powder Coating Machinery.

5. I was receiving auto parts from various vendors and sending back duly powder coating (powder i was purchasing from market and also taking CENVAT credit on the purchase of powder.

6. I charged service tax from the parties approximately two years and stopped in July, 2013 as i was asked by our vendor that they are charging excise duty from their OEM on the product being Powder Coated by me.

7. Now i have given entire plant and machinery, land and building  on rent to some one else.

My queries:-

1. I am being  asked by Central Excise Officer during audit of my EOU unit that my Powder Coated Plant is not registered with Central Excise and registered in Service Tax Only, Wrong credit of CENVAT has been taken by me on Plant and Machinery and Purchase of Powder.

2. He is also asking Powder Coating is not my JOB Work Income, it will be considered as manufacturing.

I shall be thankful, if any one will guide me accordingly and will provide me supporting notification/clarification/circulars to show to my management.  He is insisting me to deposit the CENVAT credit taken by me in CASH.   What should i do?.  Please guide me accordingly.

Thanks and regards

Posts / Replies

[Sanjeev Tambe]

Dear Mr. Chopra,

Point no. 6: You mentioned that you were charging service tax to your customers. Were you charging service tax on full contract price ?  

Ans for Query 1

You are absolutely right in taking cenvat credit on inputs for your powder coating job work. ASs you are paying service tax on your OUTPUT service of powder coating.

Query 2: He can not say that powder coating is your mfg. activity simply because you receive you auto parts for POWDER COATING. the process is job work i.e works contract. And your vendor charges excise duty on his product. 

You have not mentioned whether your vendor is sending his material to you under Rule 4(5)(a) annexure or Under Notification no. 214/86. If not then the process carried out by you may amounts for manufacture and attracts excise duty as manufactured goods.

[Ashok Chopra]

Dear Mr. Tambe,

Thanks for your kind guidance

1. I was charging service tax on full contract price.

2. My vendor was sending his material to me on Excise Challan (For movement of inputs or partially processed goods under rule 4(5)(a) and/or Notification no. 214/86 dated 25-03-1986 from one factory to another factory for further processing/operation).

Please advice

Thanks and regards

[Sanjeev Tambe]

You are Job worker undertaking to process partially processed goods. The T.O of your Works contract can not be clubbed with your mfg. T.O.  If your vendor is sending the material under Notification no. 214/86. it is exempted from excise durt in the hands of Job worker.