Job-work challan lapse is only a procedural breach when goods are accounted for and no evasion is shown.

Goods duly accounted for in raw material records and cleared for job work without evidence of clandestine movement could not attract duty demand, confiscation or major penalties merely because the prescribed challan was not issued. The omission to accompany the goods with the job-work challan was treated as a procedural lapse under Notification No. 214/86-C.E., insufficient to prove suppression or intent to evade duty. However, non-compliance with the mandatory challan requirement still justified a limited penal consequence, so the substantive demand and confiscation were set aside while only a nominal penalty was sustained for the procedural breach.

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Issues: (i) Whether the demand of duty, confiscation and penalties could be sustained when the copper rods/bars were accounted for in the raw material records and the omission was only non-issuance of the prescribed challan while sending the goods for job work. (ii) Whether violation of the challan requirement under Notification No. 214/86-C.E. justified any penalty.

Issue (i): Whether the demand of duty, confiscation and penalties could be sustained when the copper rods/bars were accounted for in the raw material records and the omission was only non-issuance of the prescribed challan while sending the goods for job work.

Analysis: The goods were purchased by the assessee and entered in the raw material account, and credit was availed on the purchase invoice. Their onward movement to the job worker was not shown to be clandestine, and the absence of Annexure-II challans was treated as a procedural lapse rather than evidence of suppression or intent to evade duty. The conclusions below the Tribunal level were found to rest on assumptions and presumptions, which were insufficient to sustain a finding of planned evasion.

Conclusion: The demand of duty, confiscation and the connected penalties were set aside.

Issue (ii): Whether violation of the challan requirement under Notification No. 214/86-C.E. justified any penalty.

Analysis: Although the assessee succeeded on the larger allegation of evasion, the notification required the goods to be sent to the job worker under cover of a challan. That procedural requirement was admittedly not complied with, and such contravention warranted a limited penal consequence.

Conclusion: A nominal penalty was justified for the procedural contravention, and the balance penalty was set aside.

Final Conclusion: The substantive duty demand and major penalties failed, but the assessee remained liable only to a reduced penalty for non-compliance with the prescribed job-work procedure.

Ratio Decidendi: Where goods are duly accounted for and there is no evidence of clandestine clearance or intent to evade duty, omission to follow a prescribed job-work challan procedure is a procedural lapse that cannot sustain duty demand, confiscation, or major penalties, though a nominal penalty may still be imposed for the procedural breach.

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