Service Tax can’t be levied on Fixed Components of Job Charges: CESTAT [Read Order]

The Allahabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), while allowing an appeal filed by ajob Worker of Hindustan Coca Cola Beverages Pvt. Ltd, held that the service tax cannot be levied on the fixed components of job charges.

The department was of the view that the process undertaken by the Appellant amounts to manufacture as per the definition of manufacture, and the Appellant is discharging duty of excise on the goods so manufactured, and only the process which does not amounts to manufacture is liable to be taxed under the Finance Act 1994.

The appellant challenged the order before the Tribunal contending that since the entire Job Charges have already suffered Excise Duty, demand of service Tax again on the same transaction or value, amounts to double demand, which is not permissible in the scheme of service tax.

While allowing the appeal, Judicial Member Anil Choudhary and Technical Member P Anjani Kumar found that the appellant have actually entered into an agreement for manufacture on job work basis.

“Evidently, as per the agreement the job charges have been spread over in two tier billing i.e. fixed charges and variable charges. The reason being that in summer season there is more demand of packed water and beverages, whereas in other months, the demand is lower. Keeping in view the constant availability of funds to meet the fixed charges and finance charges and for variable cost towards job charges, two tier billing has been provided, to the appellant job worker to meet the financial obligation round the year. Admittedly, appellant has paid the excise duty on the goods manufactured and cleared for the principal manufacturer, as is evident from the copy of excise returns filed before the Tribunal. In this view of the matter, we conclude that the job charges received by the appellant have formed part of the cost of manufacture, which have suffered excise duty. Accordingly, we hold that service tax cannot be levied on the fixed components of job charges,” the Tribunal said.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan AdFree. Follow us on Telegram for quick updates.

Brindavan Bottlers Pvt. Ltd. vs Commissioner of Central Goods &Service Tax and Central Excise , 2021 TAXSCAN (CESTAT) 174 , Shri Vineet Kumar Singh , Shri Gyanendra Kumar Tripathi