Supplier, Not Job Worker, Liable for Duty on Returned Goods: Tribunal Decision Overturned

The Tribunal held that duty liability for job-worked goods lies with the raw material supplier, not the job worker. As the goods were returned to the supplier, the duty demand on the job worker was deemed excessive. The decision confirming duty liability and penalties was set aside, and the appeal was allowed with consequential reliefs as per law.

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Issues:
Duty liability on job-worked goods, interpretation of Rule 4(5) of Cenvat Credit Rules, compliance with Notification No. 214/86, imposition of penalties.

Analysis:
The case involved a dispute regarding duty liability on job-worked goods by M/s. Strategic Engineering P. Ltd., manufacturers of Fibre Reinforced Pipes. The department alleged duty liability on the appellants for job-worked goods supplied to M/s. Aban Constructions (Pvt.) Ltd. The original authority confirmed the duty liability and imposed penalties, which was upheld by the Commissioner (Appeals). The appellants challenged this decision before the forum.

During the hearing, the appellants argued that Rule 5 of the Cenvat Credit Rules is applicable to the manufacturer/supplier of raw material, not the job worker. They provided evidence that duty had been paid at the supplier's end. The department contended that Notification No. 214/86 requirements must be followed for sending goods to job workers, including giving an undertaking to the Central Excise Commissioner.

Upon review, it was found that the main grounds for proposing duty demand were non-compliance with job work challans and willful suppression of job-work production. The Notification No. 214/86 and Rule 4(5) of the Cenvat Credit Rules are beneficial provisions for manufacturers to send raw materials for processing. Rule 4(5) specifically enables manufacturers to send inputs to job workers for processing and return within 180 days.

The Tribunal observed that the onus of duty liability lies with the raw material supplier, not the job worker. As the job-worked goods were returned to the supplier, the demand of duty liability from the job worker was deemed excessive. Therefore, the impugned order confirming duty liability and penalties was set aside, and the appeal was allowed with consequential reliefs as per law.

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