Intermediate goods sent for job work not treated as final dutiable product; extended limitation failed for lack of suppression.

Lacquered metalised polyester film cleared for job-work manufacture of exempted zari was not treated as the assessee's final dutiable product, because the clearances occurred within the applicable credit reversal framework and were for further processing. The demand was also held time barred, since the assessee had disclosed the manufacturing activity and clearance pattern to the department, and suppression was not established to justify the extended limitation period. On these facts, the duty demand and penalty did not survive, and relief was granted to the assessee.

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Issues: (i) whether Lacquered Metalised Polyester Film cleared to the job worker was liable to duty as the assessee's final product, and (ii) whether the demand was barred by limitation for want of suppression.

Issue (i): whether Lacquered Metalised Polyester Film cleared to the job worker was liable to duty as the assessee's final product

Analysis: The assessee was registered for manufacture of both a dutiable product and an exempted product. Part of the film was used in the manufacture of exempted zari through job work, and the clearances were made in the framework of the applicable credit reversal mechanism. On these facts, the film cleared for further processing could not be treated as the assessee's final product attracting duty at the stage of clearance to the job worker.

Conclusion: The issue was decided in favour of the assessee.

Issue (ii): whether the demand was barred by limitation for want of suppression

Analysis: The assessee had informed the Revenue about the manufacturing activity and the mode of clearance, and the jurisdictional Superintendent had also directed reversal of credit. In view of this disclosure, the finding of suppression to invoke the larger period was not sustainable, and the substantial part of the demand was time barred.

Conclusion: The issue was decided in favour of the assessee.

Final Conclusion: The demand and penalty did not survive, and the impugned order was set aside with relief to the assessee.

Ratio Decidendi: Where intermediate goods are cleared for captive use in the manufacture of an exempted final product and the department is duly informed, such clearances cannot be treated as the assessee's final dutiable product, and extended limitation cannot be invoked in the absence of suppression.

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