Job-work credit and returned goods duty demands fail where timely re-entry and no clandestine removal are shown.

Documentary records showing that inputs sent for job work were returned within the prescribed time under Rule 57F(4) prevent recovery of credit, because the basis for reversal ceases once timely re-entry is established. Duty cannot be demanded on duty-paid goods returned under Rule 173H merely because they are not physically traceable during inspection; absent positive evidence of clandestine removal or re-clearance of non-duty-paid goods, no fresh excise liability arises. The stated effect is that both demands fail where compliance is supported by challans, re-entry records, and the absence of incriminating evidence.

---

---

Issues: (i) Whether credit was liable to be recovered on inputs sent out for job work when challans and re-entry records showed their return within the stipulated time under Rule 57F(4); (ii) Whether duty could be demanded on duty-paid goods returned under Rule 173H merely because they were not physically traceable during inspection.

Issue (i): Whether credit was liable to be recovered on inputs sent out for job work when challans and re-entry records showed their return within the stipulated time under Rule 57F(4).

Analysis: The record contained the relevant challans and extracts showing receipt of the goods back from the job workers within the prescribed period. Those documents were not properly considered in the original adjudication. Once the return of the inputs within time was established, the basis for recovery of credit did not survive.

Conclusion: The demand relating to inputs sent for job work was unsustainable.

Issue (ii): Whether duty could be demanded on duty-paid goods returned under Rule 173H merely because they were not physically traceable during inspection.

Analysis: The returned goods had already suffered duty on first clearance. Mere non-availability or inability to physically verify the goods in the factory did not by itself establish clandestine removal or any fresh duty liability. In the absence of positive evidence that non-duty-paid goods were cleared in the guise of returned goods, the department could not fasten duty liability.

Conclusion: The demand on the returned goods was not legally sustainable.

Final Conclusion: The impugned orders were set aside and the assessee obtained relief on both substantive demands.

Ratio Decidendi: Where documentary evidence shows timely return of inputs sent for processing, and where duty-paid returned goods are not shown by positive evidence to have been clandestinely cleared again, excise duty or credit recovery cannot be sustained.

---