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Issues: (i) Whether, under Rule 12B of the Central Excise Rules, 2002, the duty liability could be fastened on the principal manufacturer when the job-worker had already discharged duty and the rule prescribed no particular form for exercising the option; (ii) Whether duty could again be demanded on the transfer of duty-paid processed goods from the principal manufacturer to another unit for further manufacture.
Issue (i): Whether, under Rule 12B of the Central Excise Rules, 2002, the duty liability could be fastened on the principal manufacturer when the job-worker had already discharged duty and the rule prescribed no particular form for exercising the option.
Analysis: The rule did not prescribe any particular form for exercising the option to have duty discharged by the job-worker or the principal person. Once duty had been accepted as paid by the job-worker, the authorities could not adopt a contrary position to levy the same duty again on the principal manufacturer. The demand itself proceeded on an inconsistent basis, because it accepted partial discharge by the job-worker while attempting to recover the balance by treating the principal manufacturer as liable under the same rule. The deemed exercise of option was therefore valid and the valuation approach adopted below was unsustainable.
Conclusion: The issue was decided in favour of the assessee, and the demand fastening duty liability on the principal manufacturer was set aside.
Issue (ii): Whether duty could again be demanded on the transfer of duty-paid processed goods from the principal manufacturer to another unit for further manufacture.
Analysis: Once duty had already been discharged on the processed goods and no fresh product came into existence in the hands of the appellant at that stage, the subsequent transfer of those goods for further manufacture could not be subjected to a fresh levy. The record also did not establish that the later manufacturing activity was undertaken on a job-work basis so as to attract the proposed duty demand on the appellant.
Conclusion: The issue was decided in favour of the assessee, and the additional duty demand on such transfers was not sustained.
Final Conclusion: The impugned order was set aside and the appeals were allowed, with no duty demand surviving against the appellants on the issues decided.
Ratio Decidendi: Where the governing job-work rule does not prescribe a mandatory form for opting to discharge duty and duty has already been accepted as paid by the job-worker, the department cannot re-fasten the same duty on the principal manufacturer on an inconsistent valuation basis; further, duty cannot be levied again on movement of duty-paid goods unless a fresh manufacture attracting levy is shown.
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