A Bird View on Excise Duty on Job Works
Under Provisions of Exemption to Excise Duty on Job Works under Notification No.214/86 assessee engaged in manufacturer on job work basis, he has to pay duty on material cost plus job charged. However, if a product covered under MRP provision is manufactured on job work basis, duty will be payable as per provisions of section 4A, i.e. on basis of MRP less abatement
No duty liable to job worker- It has been held that there is no duty liability on the job worker when material is sent under Cenvat provision or under 214/86-CE.
Declaration under notification 214/86-CE- It is advisable that the declaration under Notification No. 214/86-Ce is given if the material is being sent directly to place of job worker from supplier of inputs, without bringing it in the factory, to avoid fruitless controversies.
Raw material as well as semi-finished goods can be sent out for job work. The exemption is available even if the job worker manufactures an intermediate product.
Notification No.214/86-CE does not prohibit a job worker from utilizing other inputs in addition to raw material received by him and recover charges therefore from the principal manufacturer.
Provisions related to Removal of goods for Job Work
Removal for processing/test- The inputs/capital goods can be removed as such or after partial processing to job worker for further processing, testing, repairs, reconditioning, or for manufacture of intermediate goods necessary for manufacture of final products or any other purpose without any duty payment.
Goods should be returned to factory/premises of service provider- After carrying out the operation/test/repair etc., the goods should be returned to the factory or premises of supplier within 180 days.
If these are not received back within 180 days of their being sent out, manufacturer/ service provider should pay an ‘amount’ equivalent to Cenvat credit attributable to inputs/ capital goods. Payment can be through Cenvat credit or P LA. If the inputs/ capital goods come back after 180 days , then manufacturer/service provider can again take Cenvat credit of duty reversed by him.
If part of goods is received back 180 days, the obligation for debiting the credit shall arise only in respect of Cenvat credit attributable to that part which is not received within 180days.
No Reversal even if capital goods not returned within 180 days- Incase of Capital goods sent to job workers even if they are not returned by job worker within 180 days , Cenvat Credit is not required to be reversed .
Moulds and dies, jigs and fixtures are not required in 180 days- The requirement that the
capital goods/ input must come back within 180 days is not applicable to moulds and dies.
DOCUMENTATION IN DIFFERENT SITUATIONS :Direct dispatch of inputs to job worker – It is advisable that even when goods are sent directly to job worker’s place, a delivery challan should be prepared by manufacturer for control purpose. The delivery challan should clearly state that goods have been sent directly to job worker’s place by the supplier The manufacturer can avail Cenvat credit only after all inputs are received after job work.
Returning of goods by job worker – Goods should be returned by job worker under his own challan, giving reference to challan of the manufacturer who has sent the inputs/capital goods. Goods can be returned by job worker in piece-meal under different challans on different dates.
Cenvat Credit rule 6(3)(b) (i.e. Payment of ‘amount’) will apply
SOME IMPORTANT POINTS TO BE KEPT IN MIND REGARDING JOB-WORK :
Use of incidental material is no bar in job work – Additional of minor items by job worker would not detract it being a job work. If some negligible raw material is used by job worker, it will still be job worker, if such use is only incidental nature.
No duty on Invisible losses – No duty is payable on invisible losses during processing even if such losses were higher than those permitted by raw material supplier and raw material supplier issues debit note for excess losses.
Goods can be sent another unit of same manufacturer for job work and return.
Waste generation after goods are returned is permissible – Generation of waste and scrap is only incidental to manufacturing of final product and it cannot be said that input (proportionate to the weight of waste and scrap generated) have not been used in the manufacture of such specified final product. Percentage of waste generation will no be relevant.
Job worker can pay duty even if material sent under – Normally, job worker is not required to pay duty, if material is sent under Cenvat provisions. However, in some cases, he may like to pay duty, if –
(a)He has put his own inputs
(b) He has unutilized Cenvat credit.
Procedure permissible even if identity of inputs gets lost or inputs burnt – Cenvat credit is available even if identity of inputs is lost when job worker returns the goods after processing
PLACE OF REMOVAL :When goods are sold at the factory of job worker by principal Manufacturer – Value will be the ‘transaction value of the goods at which the goods are sold’ by the principal manufacturer for delivery at the time of removal of goods from the factory of job worker.
When goods are sold by principal Manufacturer from some other place – If goods are delivered at other place (e.g. depot, branch, godown etc.) and sold from there, the valuation will be on the basis of ‘normal’ transaction value of goods at or about the same time’ by the Principal manufacturer from such place. Cost of transport from premises from where goods sold to place of delivery will not be included in the assessable value.
Inputs sent directly to job worker from place of manufacturer of inputs – In some cases material may be procured by principal manufacturer, but may be sent directly to job worker for manufacturer. In such case, if the name of job worker is shown as consignee, the job worker can avail Cenvat credit on basis of such invoice.
Job worker can take Cenvat Credit on basis of invoice issued by registered dealer. Job worker cannot avail Cenvat credit if raw material supplier has availed the same.