Insulated Glass processed on Job Work basis -Applicability of Excise Duty / VAT

Glass processors/ Fabricators in India generally process the Toughened / Laminated / Insulated Glass. In glass toughening process nothing is added to the glass. It is done by heating the glass up to certain temperature followed by sudden cooling. However in case of laminated and insulated glass some other inputs are also added. Such glasses are manufactured on job work basis also. Therefore, it is necessary to examine how such job works, where the glass processor uses his own inputs also, should be dealt under Excise and Sales Tax Law.


In above case the principle manufacture sends glass pairs to the job worker. Such pairs of glasses are converted into laminated/ insulated Glass by using own inputs i.e. PVB or Aluminium Spacer, Desiccant, Sealants, etc. It is imperative for the job worker to charge correct Excise Duty and VAT/ Sales Tax to avoid any demand from the department. The method is elaborated below;


According to Excise Rules, Job Work means manufacture or production of goods on behalf of a principal manufacturer, from any inputs or goods supplied by the said principal manufacturer. Thus, use of own inputs by the Job Worker is not envisaged.  In other words, if a Job Worker uses own inputs to complete the process then such process may not be called as Job Work. The Hon’ble Apex Court in the case of Prestige Engineering (India) Ltd. 1994 (72) E.L.T. 497 (S.C.) held that when the job worker contributes his own raw material to goods supplied by the customers and manufactures different product, it does not amount to job work, however addition or application of minor items by job worker would not detract it being a job work.  Accordingly, the manufacturing of Laminated/ Insulated Glass where substantial inputs are contributed by Job Worker goes out of the ambit of job work.


It is well settled that the value of goods produced on job work basis, will not be the processing charges alone, but the intrinsic value of processed item. Ownership of goods is of no relevance. In this context we may rely on Apex Court’s judgments in case of Ujagar Prints 1988 (38) E.L.T. 535 (S.C.) and Texmaco Ltd. 1995 (77) E.L.T. 501 (S.C.). Therefore, goods manufactured after job work should be cleared on excise invoice on payment of duty by taking their intrinsic value as AV. It shall obviate any demand that may arise in future. Moreover, the principal manufacturer may not object as he can avail Cenvat credit of Duty paid. Here it is pertinent to add that the job worker, while arriving at AV, must ensure that it is aligned either with Rule 6 or Rule 10A of Central Excise Valuation (Determination of Price of Excisable goods) Rules, 2000; depending upon the case.


The other aspect is applicability of VAT / Sales Tax on value of property in goods passed by way of accretion. The value for the purpose of levying Vat / Sales Tax shall include excise duty also which needs to be calculated on intrinsic value ibid. Therefore, to preclude any demand of Excise and Sales Tax, we need to charge correct Excise Duty and Sales Tax, as mentioned above.


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