Rule 209A penalty on manufacturer fails where scrap arose during lawful job work and no abetment was shown

Penalty under Rule 209A of the Central Excise Rules was found unsustainable against the manufacturer where scrap arose during machining by a job worker under the prescribed Rule 57F job work procedure. The record showed no abetment by the manufacturer in any alleged duty evasion and no evidence that the sale proceeds of the scrap were shared with the manufacturer. In the absence of illegality or irregularity attributable to the manufacturer, the penal provision could not be invoked, and the penalty was set aside.

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Issues: Whether penalty under Rule 209A of the Central Excise Rules was leviable on the manufacturer in respect of scrap cleared by the job worker while the goods were sent for job work under Rule 57F of the Central Excise Rules.

Analysis: The only dispute before the Tribunal was the penalty imposed under Rule 209A. The goods were sent to the job worker following the prescribed job work procedure under Rule 57F, and the scrap arose during machining by the job worker. The record did not show any act of abetment by the manufacturer in the alleged duty evasion, nor was there evidence that the sale proceeds of the scrap were shared by the manufacturer. In the absence of any illegality or irregularity on the part of the manufacturer, the penal provision could not be applied.

Conclusion: Penalty under Rule 209A was not sustainable against the manufacturer, and the penalty was rightly set aside.

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