Job-work duty liability cannot shift to the processor merely because processed goods fall outside a notification.

Under the job-work return-and-credit mechanism, duty could not be fastened on the job worker merely because the processed goods were outside Notification No. 214/86-C.E. The Tribunal held that the Revenue's authorities were distinguishable, since they did not displace the line of decisions treating the principal manufacturer as responsible under the statutory scheme, with separate credit consequences if goods are not returned in time. On that basis, the demand and penalty on the job worker were unsustainable and consequential relief followed.

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Issues: Whether duty could be demanded from a job worker where the processed goods were handled under the job-work credit/return mechanism and the benefit of Notification No. 214/86-C.E. was denied on the ground that the goods were not covered by that notification.

Analysis: The Tribunal noted that the Supreme Court decision relied upon by the Revenue did not deal with job work, and the other cited Tribunal decision was distinguishable because it only dealt with the situation where the supplier of raw material had to satisfy the notification conditions. On the other hand, the Tribunal accepted the line of decisions holding that where processing is carried out under the relevant return-and-credit provisions, the duty burden is not to be fastened on the job worker merely because the goods are excluded from the notification. The scheme of the provisions was understood as preserving the principal manufacturer's position as the manufacturer for the processed inputs sent out for job work, with credit consequences if the goods are not returned within time.

Conclusion: The demand and penalty on the job worker were not sustainable and the appeal was allowed with consequential relief.

Final Conclusion: The denial of notification benefit could not justify shifting the duty liability to the job worker in the facts of the case.

Ratio Decidendi: When job work is undertaken under the applicable return-and-credit mechanism, duty cannot be demanded from the job worker merely because the processed goods are outside the scope of the notification, if the statutory scheme treats the principal manufacturer as responsible for the goods and the credit consequences are separately regulated.

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