Job work scheme benefit depends on procedural compliance, and duty on supplied inputs needs factual verification before recovery.

A job worker may claim the benefit of the prescribed job work scheme under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 and Notification No. 214/86-CE if the intermediate goods are manufactured for another manufacturer who uses them in the final product. On that basis, differential duty computed by adding the value of inputs supplied by the principal manufacturer cannot be sustained unless compliance with the job work procedure is factually verified. Where the lower authorities have not examined that factual basis, verification and re-quantification are required rather than automatic recovery on the full value of goods.

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Issues: Whether the appellant, having carried out job work under the prescribed procedure, was entitled to the benefit of the job work scheme so that duty was not recoverable on the full value of the goods including the value of inputs supplied by the principal manufacturer.

Analysis: The dispute turned on whether the appellant had followed the procedure contemplated for job work under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 and Notification No. 214/86-CE dated 25.03.1986. If the intermediate goods were manufactured for another manufacturer who used them in the final product, the job worker could claim the benefit of the scheme notwithstanding that duty had been paid by mistake. On that footing, the differential duty computed by including the value of supplied materials would not survive. As the lower authorities had not examined the factual basis of this claim, verification was necessary.

Conclusion: The demand was not finally upheld on this issue and the matter was remanded for verification and re-quantification.

Ratio Decidendi: A job worker following the prescribed job work procedure is entitled to the benefit of the scheme, and differential duty based on inclusion of supplied material value cannot be sustained without factual verification of compliance.

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