Job-work conversion of imported raw materials was not shown to breach exemption conditions, so the pre-deposit direction was set aside.

Imported raw materials sent by a manufacturer-exporter to a job worker for conversion were prima facie not shown to be a prohibited transfer under the exemption notifications. The materials referred to a foreign trade public notice recognising conversion through a job worker and treating only sale of the imported goods before conversion as a breach of the actual user condition. On the record, the goods were sold only after conversion, and the notification language regarding supporting manufacturers for merchant exporters did not justify reading a bar against a manufacturer-exporter using a job worker. The Tribunal's assumption was therefore not sustainable at the pre-deposit stage, and the pre-deposit direction was set aside.

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Issues: Whether the Tribunal was justified in directing the assessee to deposit Rs. 1 crore as a condition for hearing the appeal, on the premise that sending imported billets to a job worker for conversion amounted to a prohibited transfer under the exemption notifications.

Analysis: The available materials indicated, prima facie, that the import notifications did not bar a manufacturer-exporter from getting imported raw materials converted through a job worker. A public notice issued by the foreign trade authorities under a similar scheme recognized conversion through a job worker and treated only sale of the imported raw materials before conversion as a violation of the actual user condition. The record also showed that the goods were sold after conversion, not before. Further, the notification language dealing with supporting manufacturers in the case of a merchant exporter did not justify an inference that a manufacturer-exporter was prohibited from using a job worker or supporting manufacturer. The Tribunal's assumption that there was no provision permitting such conversion was therefore not sustainable at the pre-deposit stage.

Conclusion: The pre-deposit order was not justified and was set aside; the appeal before the Tribunal was directed to be heard on merits without insisting on pre-deposit.

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