Job Work under Central Excise

CA Rajesh Kumar T R

Dictionary Meaning

Unabridged Dictionary: Work done by Job Chambers Dictionary: A task, bit of work Chambers Dictionary

Definition as per Central Excise Provisions

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

Job Work under Cenvat Credit Rules

Similar definition as discussed under notification 214/86 CE dated 25.03.1986

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.

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

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

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.

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

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

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

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

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

Exemptions
Exemptions from payment of duty when:
Job work is under Cenvat provisions Job work under notification 214/86 Job work for SSI units

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

 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

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

 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

Job work for SSI units

As they dont 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

Other removals
Rule 16A allows for removal of:
Inputs received in factory As such or after partially processed For

further processing, testing, repair, reconditioning Fulfillment of conditions specified by Commissioner of Central Excise

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

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 doesnt apply to proto type sent out for trial and development Conditions as specified in permission will have to be followed

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 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??