Cenvat job-work duty liability depends on return of processed goods to the principal manufacturer, not mere outsourced manufacture.

The Cenvat scheme permits inputs to be sent to a job worker for processing, even where the process amounts to manufacture, without automatically shifting duty liability to the job worker. The scheme treats the principal manufacturer as retaining the manufacturing role for outsourced processing, while safeguarding revenue by requiring recovery of credit if the processed goods are not returned within the stipulated time. Duty demand on the job worker is therefore not sustainable where the laminated fabrics are returned to the principal manufacturer, and liability turns on whether the processed goods remain within the permitted Cenvat framework.

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Issues: Whether laminated fabrics processed by a job worker on inputs sent under the Cenvat scheme could be subjected to duty demand on the job worker as manufacturer.

Analysis: The Cenvat scheme permits removal of inputs for processing by a job worker and does not bar such movement merely because the processing results in manufacture. The scheme is structured to keep the input supplier as the manufacturer for outsourced processing, while ensuring that if the processed goods are not returned within the stipulated time the credit taken on the inputs is recovered. If duty on such processed goods were fastened on the job worker even when the goods were returned to the principal manufacturer, it could create a mismatch between duty payment and credit availment and defeat the scheme. The liability therefore depends on whether the processed fabrics are returned to the principal manufacturer or retained outside the permitted framework.

Conclusion: The duty demand on the job worker was not sustainable where the laminated fabrics were received back by the principal manufacturer, and the matter required re-determination only for any remaining demand in accordance with that principle.

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