QUESTION

One of My Client is Ginning Factory. Manufacturing his own Goods as well as for others. Ginning Industries means Processing of Raw Cotton to Ginned Cotton. Ginned Cotton converts to Baled My Questions are as under 1. If it done Job-work for others, is this job-work was taxable under Service Tax ? 2. It also works as commission agent of Raw Cotton and Ginned Cotton. Is Commission received on Raw Cotton and Ginned Cotton was Taxable under Service Tax

ANSWER

Facts of the case: One of My Client is Ginning Factory, Manufacturing his own Goods as well as for others. 1. Whether service tax is applicable on Job-work done for others? 2. It also works as commission agent of Raw Cotton and Ginned Cotton. Is Commission received on Raw Cotton and Ginned Cotton was Taxable under Service Tax?

Law Applicable:  Finance Act (ST) 1994- Section 66- Charge of service tax

(f) services by way of carrying out any process amounting to manufacture or production of goods excluding alcoholic liquor for human consumption;

Central Excise Act 1944- Section 2- Definitions.
f) "manufacture" includes any process,'

(i) incidental or ancillary to the completion of a manufactured product; and
(ii) which is specified in relation to any goods in, the Section or Chapter notes of the Fourth Schedule to the Central Excise Tariff Act, 1985 (5 of 1986) as amounting to manufacture; or
(iii) which in relation to the goods specified in the Third Schedule, involves packing or repacking of such goods in a unit container or labeling or re-labeling 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,

and the word "manufacturer" shall be construed accordingly and shall include not only a person who employs hired labour in the production or manufacture of excisable goods, but also any person who engages in their production or manufacture on his own account.

Interpretation: As per section 66 of Finance Act  "services by way of carrying out any process amounting to manufacture or production of goods" is covered under negative list of services.

Thus job work of manufacturing was exempt under Service tax as manufacturing covers any process incidental or ancillary to the completion of the manufactured product. However commission income received by commission agent is taxable.

Conclusion:  job work of manufacturing was exempt under Service tax. However commission income received by commission agent  (Reply dt.22.08.2020)