Job work clearances and CENVAT protection: processed goods returned to the principal manufacturer avoided duty demand.

Rule 4(5)(a) of the CENVAT Credit Rules, 2001 protected a job worker returning processed fabrics to the principal manufacturer under job work challans. The absence of coverage under Notification No. 214/86-CE did not create duty liability because the rule operated independently of that notification and was treated as pari materia with Rule 57F(4) of the Central Excise Rules. Applying its earlier decisions, the Tribunal stated that no demand can be sustained against a job worker where inputs or processed goods are returned to the principal manufacturer under the rule, and the demand, interest and penalties were set aside.

---

---

Issues: Whether duty could be demanded from a job worker clearing processed fabrics back to the principal manufacturer under Rule 4(5)(a) of the CENVAT Credit Rules, 2001 merely because the goods were not covered by Notification No. 214/86-CE.

Analysis: The goods were received from the principal manufacturer under job work challans and returned after processing. The substantive protection flowed from Rule 4(5)(a), which was treated as pari materia with Rule 57F(4) of the Central Excise Rules. The absence of the goods from Notification No. 214/86-CE did not alter the position because the rule operated independently of the notification. The Tribunal applied its earlier decisions holding that no demand can be sustained against a job worker when inputs or processed goods are returned to the principal manufacturer under the rule.

Conclusion: No duty liability could be fastened on the assessee, and the demand, interest, and penalties were set aside.

---