Job-work duty liability on processed yarn rested with the principal manufacturer under the credit procedure.

Chenille yarn cleared on job work basis was treated as covered by the job-work credit procedure, where duty-paid inputs were received under the principal manufacturer's certificate and the processed goods were returned under the applicable rule. The Tribunal applied Rule 57F(4) of the Central Excise Rules, 1944, read as corresponding to Rule 4(5)(a) of the Cenvat Credit Rules, 2002, and followed prior precedent and the Board circular to state that the duty obligation lay with the principal manufacturer, not the job worker. Since the principal manufacturer had discharged duty on the final product, the situation was revenue neutral and the demand against the job worker was unsustainable.

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Issues: Whether duty was payable on chenille yarn cleared on job work basis when the inputs were received under the job-work procedure and the final product was cleared on duty by the principal manufacturer.

Analysis: The dispute turned on the effect of the job-work arrangement and the applicable credit-based procedure. The material showed that the job worker received duty-paid inputs under the certificate issued by the principal manufacturer and returned the processed goods under the relevant job-work provision. The Tribunal treated Rule 57F(4) of the Central Excise Rules, 1944 as corresponding to Rule 4(5)(a) of the Cenvat Credit Rules, 2002 and relied on earlier precedent and the Board circular to hold that, in such a situation, the duty obligation rests with the principal manufacturer, not the job worker. It was also significant that the principal manufacturer had discharged duty on the final product, making the situation revenue neutral.

Conclusion: Duty was not payable by the assessee on the impugned job-work clearances, and the Revenue's demand was unsustainable.

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