Job-work clearances for dutiable final products were prima facie outside reverse-credit liability under Cenvat rules.

Metalised film manufactured on a job-work basis and returned to the principal manufacturer under job-work challans, where the principal used it in dutiable final products, was prima facie treated as clearance under Notification No. 214/86-C.E. and not as exempted goods for Rule 6(3)(b) of the Cenvat Credit Rules, 2002. On that view, the reverse-credit demand was not attracted at the pre-deposit stage, and the appellants were granted waiver of pre-deposit of duty and penalty with recovery stayed.

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Issues: Whether, in a job-work arrangement covered by Notification No. 214/86-C.E., the clearances of metalised film to the principal manufacturer could prima facie be treated as clearances of exempted goods attracting Rule 6(3)(b) of the Cenvat Credit Rules, 2002, and whether the appellants were entitled to waiver of pre-deposit of duty and penalty.

Analysis: The appellants manufactured the disputed film on job-work basis and returned it to the principal manufacturer under job-work challans. The principal manufacturer used the goods in the manufacture of dutiable pouches. On these facts, the clearance to the principal manufacturer was treated as a clearance under the job-work notification and not as a sale of exempted goods for the purpose of Rule 6(3)(b). The Tribunal found, prima facie, that the demand was not attracted in the manner alleged and that the case disclosed sufficient ground for protection against recovery during the appeal.

Conclusion: The appellants were entitled to waiver of pre-deposit of duty and penalty, and recovery was stayed.

Final Conclusion: The stay application succeeded on a prima facie view that the job-work clearances did not attract the disputed reverse-credit liability at the pre-deposit stage.

Ratio Decidendi: Goods manufactured on job work and returned under the applicable exemption notification for use in the principal manufacturer's dutiable final product do not, prima facie, constitute exempted sales attracting reverse-credit liability under Rule 6(3)(b).

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