Job-worked goods and Rule 57C: goods sent to the principal manufacturer were not treated as exempted, with remand for fresh adjudication.

Job-worked goods cleared to the principal manufacturer are not treated as exempted goods for Rule 57C where the principal later clears the final product on payment of duty. The Tribunal noted that later decisions support this legal position and found that the impugned order had proceeded on a different footing. Because the factual position needed verification against the correct law, the matter was sent back for fresh adjudication by the Commissioner. The demand was therefore not finally determined on merits, and reconsideration was directed in light of the applicable legal position and facts.

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Issues: Whether goods manufactured on job work and cleared to the principal manufacturer without payment of duty are to be treated as exempted goods so as to attract Rule 57C of the erstwhile Central Excise Rules, and whether the matter required reconsideration on the correct legal position.

Analysis: The Tribunal noted the legal position that job-worked goods cleared to the principal manufacturer, who thereafter clears the final product on payment of duty, are not to be treated as exempted products for the purpose of Rule 57C. It also took note of later decisions confirming this view. Since the impugned order had proceeded on a different footing and the factual position required verification in the light of the declared law, the Tribunal considered it appropriate to send the matter back for fresh adjudication.

Conclusion: The demand was not finally decided on merits; the order was set aside and the matter was remanded to the Commissioner for fresh decision in accordance with the law and the factual position.

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