Job-work clearances under excise procedure place duty burden on the principal manufacturer, not the job worker.

Inputs sent to a job worker under the prescribed job-work procedure, processed and returned to the principal manufacturer, did not attract excise duty on the job worker where the governing notification and departmental circulars placed the duty burden on the principal manufacturer. The Commissioner (Appeals) noted that the scheme under Rule 57F(4) read with Rule 57AC(5) and Notification No. 214/86-C.E. treated the principal manufacturer as responsible for duty discharge. In view of the settled position and the binding effect of the earlier Supreme Court dismissal in the connected matter, the demand and penalty were not sustainable.

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Issues: Whether a job worker processing inputs received under Rule 57F(4) and clearing the intermediate product back to the principal manufacturer without payment of duty was liable to pay additional excise duty and whether penalty could be sustained.

Analysis: The dispute turned on the effect of the job-work procedure under Rule 57F(4) of the Central Excise Rules, 1944, read with Rule 57AC(5) of the Central Excise Rules, 1944 and Notification No. 214/86-C.E. dated 25-3-86. The job-worker had received inputs under the prescribed challans, carried out processing, and returned the goods to the principal manufacturer. The Board's circulars were relied on to show that, in such a scheme, duty liability is to be discharged by the principal manufacturer and not by the job-worker. The order also noted that the issue had already attained finality in the light of the Supreme Court's dismissal of the Department's appeal in the earlier connected matter, and subordinate authorities were bound to follow that position.

Conclusion: The job worker was not liable to pay the demanded excise duty, and the penalty could not be sustained. The demand and penalty were set aside in favour of the assessee.

Final Conclusion: The appeal succeeded because the job-work clearances were covered by the prescribed excise procedure and the duty burden lay on the principal manufacturer, not on the job worker.

Ratio Decidendi: Where inputs are sent to a job worker under the prescribed job-work provisions and the processed goods are returned to the principal manufacturer, excise duty is not fastened on the job worker when the governing notification and departmental circulars place the duty obligation on the principal manufacturer.

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