Job work duty liability and vague brand-based allegations could not sustain excise demand on export rejects.

Goods manufactured on job work for another person are treated as manufactured by that principal under Rule 4(3) of the Central Excise Rules, 2001, with the principal liable for duty unless the job worker is authorised to pay. On the stated facts, the goods could not be fastened with duty liability on the appellants as their own manufacture. The demand for alleged domestic clearances of export rejects also failed because the show cause notice did not identify the brand names or establish their ownership, leaving the factual basis for duty, penalty and interest too vague to sustain.

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Issues: Whether duty demand, penalty and interest were sustainable where the goods were alleged to have been manufactured on job work basis and the show cause notice did not clearly specify the brand names or ownership of the brand names, and whether clearances of rejects from export garments in the domestic market could be taxed on the basis of such vague allegations.

Analysis: Rule 4(3) of the Central Excise Rules, 2001 provides that where goods falling under Chapter 62 of the First Schedule to the Central Excise Tariff Act, 1985 are produced or manufactured on job work on the account of another person, that other person is to be treated as the manufacturer and is liable to pay duty, with an option to authorise the job worker to discharge the duty liability. On the facts, the goods manufactured on job work basis for the principal could not be treated as goods manufactured by the appellants for the purpose of duty liability. As regards the alleged domestic clearances of export rejects, the notice remained vague because it did not disclose the brand names alleged to have been used or their ownership, and no clear factual foundation was laid for the demand.

Conclusion: The duty demand, penalty and interest were not sustainable, and the appeals were allowed with consequential relief.

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