CENVAT job work duty liability stayed with the supplier; processor was not liable for demand on returned fabrics.

Fabrics moved to a job-worker for processing under Rule 4(5)(a) of the CENVAT Credit Rules, 2002 remained part of the supplier's credit chain, so the duty burden did not shift to the processor merely because the goods were sent out for job work and returned after processing. Rule 4(6) was treated as the mechanism for duty-paid clearance only where goods were not to be returned and were cleared from the job-worker's premises. The absence of coverage under Notification No. 214/86-CE did not alter that position. On that basis, duty liability rested with the supplier, and the demand on the job-worker was unsustainable.

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Issues: Whether duty liability on fabrics sent for processing under Rule 4(5)(a) of the CENVAT Credit Rules, 2002 rested on the job-worker or on the supplier of the goods.

Analysis: Goods were moved to the job-worker under the prescribed CENVAT credit procedure and were processed and returned. The governing scheme treated the movement of inputs for job work as a continuation of the supplier's credit chain. Rule 4(6) also indicated that if the goods were not to be returned and were to be cleared from the job-worker's premises, the proper course was a duty-paid clearance directed in accordance with the rule. The fact that the processed fabrics were not covered by Notification No. 214/86-CE did not shift the duty burden to the processor where the goods were moved under Rule 4(5)(a).

Conclusion: The duty liability was on the supplier and not on the job-worker; the demand on the job-worker was unsustainable.

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