Excise duty on contractual replacements and job-work clearances sustained where later-supplied goods and undisputed manufacture remained taxable.

Replacement batteries supplied later under customer contracts were treated as dutiable goods, because there was no legal basis to exempt subsequently cleared goods merely on the ground that their value had been included in the original sale price. Finished goods cleared from job workers' premises on delivery challans without payment of duty were also held liable to duty, and the explanation that the job worker was the real manufacturer was not accepted. The demand, interest and consequential penalties under the Central Excise law were sustained.

---

---

Issues: (i) Whether duty was payable on replacement batteries supplied later under customer contracts; (ii) Whether duty and penalties were sustainable in respect of finished goods cleared from job workers' premises without payment of duty.

Issue (i): Whether duty was payable on replacement batteries supplied later under customer contracts.

Analysis: The replacements were cleared without payment of duty on the plea that the original sale price had already included their value and that the contract required free replacement. The record showed no legal basis for exempting subsequently cleared goods from duty merely because they were supplied later under the contract.

Conclusion: The issue is decided against the assessee and in favour of Revenue.

Issue (ii): Whether duty and penalties were sustainable in respect of finished goods cleared from job workers' premises without payment of duty.

Analysis: The appellants had taken Modvat credit and the job workers cleared the finished goods on delivery challans without payment of duty. The explanation that the job worker was the real manufacturer was not accepted, and the record supported the demand and the consequential penalties under the Central Excise Act and Rules.

Conclusion: The issue is decided against the assessee and in favour of Revenue.

Final Conclusion: The demand, interest, and penalties were upheld, and the appeal failed.

Ratio Decidendi: Goods cleared later as contractual replacements are not immune from excise duty merely because their value was included in the original supply, and finished goods cleared from job workers' premises without duty are liable to demand and consequential penalty under the Central Excise law.

---