Job-work excise duty liability on made-ups cannot be fastened to raw material supplier before Rule 12B took effect.

For the period before Rule 12B of the Central Excise Rules, 2002 came into force, prima facie excise duty on job-work manufactured made-ups could not be fastened on the supplier of raw material merely because it owned the finished goods. The rule governing duty liability for textile articles produced on a person's own account on job work applied only from 1 April 2003, so it did not cover the earlier dispute period. In the stay matter, partial pre-deposit was directed only for the balance duty on readymades, while pre-deposit of the remaining demand on made-ups and the penalty was waived pending appeal.

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Issues: Whether, in considering waiver of pre-deposit in an excise matter, the applicant was prima facie liable to discharge duty on made-ups manufactured through job work merely because it supplied the raw material and owned the finished goods, and whether pre-deposit could be waived in respect of the balance demand and penalty.

Analysis: Ownership of the finished goods was held to be irrelevant, prima facie, for fastening Central Excise duty liability. Rule 12B of the Central Excise Rules, 2002 was noted as the provision dealing with duty liability where yarns, fabrics, readymade garments or made-up textile articles falling under Chapter 63 are produced or manufactured on a person's own account on job work. Since that rule came into force on 1 April 2003 and the dispute period was from August 1998 to March 2003, prima facie duty liability could not be fastened on the applicants as suppliers of raw material for the earlier period.

Conclusion: Pre-deposit was required only for the balance duty of Rs. 87,444 on readymades falling under Chapter 62, while pre-deposit of the remaining duty demand on made-ups under Chapter 63 and the penalty was waived pending the appeal.

Final Conclusion: The stay application was allowed in part, with partial pre-deposit directed and the balance demand and penalty kept in abeyance during the pendency of the appeal.

Ratio Decidendi: For the period before the commencement of Rule 12B of the Central Excise Rules, 2002, duty liability on job-work manufactured made-ups cannot prima facie be fastened on the supplier of raw material merely on the basis of ownership of the finished goods.

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