Job-work excise duty liability: processed goods returned under prescribed challans do not attract duty at the job-worker's end.

Job work under the prescribed challan-based excise procedure does not, by itself, fasten central excise duty on the job-worker when inputs are received from the principal manufacturer, processed, and returned for further manufacture and final clearance on duty payment by the principal. The record showed compliance with the applicable movement and documentation requirements, including challans and duty-paid papers, and there was no finding of procedural non-compliance. On that basis, the duty demand at the job-worker's end, together with interest and penalty, could not be sustained.

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Issues: Whether a job-worker who receives inputs from the principal manufacturer under challans and returns the processed goods for further manufacture is liable to pay central excise duty at the job-worker's end despite compliance with the prescribed procedural framework.

Analysis: The goods were received under challans issued by the principals, the corresponding certificates and duty-paid documents were on record, and the materials and finished goods moved within the job-work chain under the applicable rule-based procedure. The record showed that the processed goods were received back by the principals and thereafter cleared on payment of duty by them. The Tribunal held that there was no allegation or finding that the statutory movement and clearance pattern had not been followed, and that the procedure under the erstwhile Central Excise Rules and the successor CENVAT Credit Rules had been substantially complied with. The cited circular and the earlier Third Member view supported the conclusion that duty is not fastened on the job-worker merely because the inputs are processed and returned under the prescribed challan-based mechanism.

Conclusion: The job-worker was not liable to pay duty on the goods returned to the principal manufacturer, and the demand, interest, and penalty could not be sustained.

Final Conclusion: The impugned adjudication was set aside and the appeal was allowed, as the duty demand on the job-worker failed on merits.

Ratio Decidendi: Where inputs are supplied under the prescribed challan procedure for job work and the processed goods are returned to the principal manufacturer for further use and final clearance on duty payment, no excise duty is exigible at the job-worker's end absent non-compliance with the governing procedure.

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