Job work under customs exemption covers coating imported chemicals on accounted fabrics, defeating duty, interest and penalty demand.

The coating of imported fire-retardant chemicals on fabrics at job workers' premises was treated as permitted job work under Notification No. 52/2003-Cus because the chemicals were sent under Development Commissioner permission, the movement and return of processed fabrics were accounted for, and the fabrics were either procured by the appellant or supported by CT-3 documentation. Applying a liberal construction of "job work" under Rule 2(n) of the CENVAT Credit Rules, 2004, the analysis accepted that job work may include situations where the job worker procures part of the raw material. As there was no allegation of diversion or unaccounted clearance, the customs duty, interest, and penalty demand was unsustainable.

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Issues: Whether the activity carried out at the job workers' premises, involving coating of imported fire-retardant chemicals on fabrics procured or manufactured in the course of the arrangement, was covered by the permission granted under Notification No. 52/2003-CUS and could be treated as job work so as to sustain the customs duty demand and penalty.

Analysis: The imported chemicals were sent to the job workers under the permission granted by the Development Commissioner and the movement of goods, as well as the return of the processed fabrics, was duly accounted for. The expression "job work" was considered in the light of Rule 2(n) of the CENVAT Credit Rules, 2004 and the line of decisions construing that expression liberally, including situations where the job worker procures part of the raw material. On the facts, the fabrics were either procured by the appellant or supported by CT-3 documentation in the case of the principal job worker, and the imported chemicals were only coated on such fabrics without any allegation of diversion or unaccounted clearance.

Conclusion: The activity fell within the permitted job work under the notification, and the demand of customs duty, interest, and penalty was unsustainable.

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