Job-work clearances and excise exemption: goods made by a job worker did not lose exemption eligibility.

Hollow screws manufactured by a job worker from inputs supplied by the principal manufacturer under Rule 57F(2) were treated as goods remaining within the principal manufacturer's production chain for excise and small-scale exemption purposes. The settled principle noted is that transfer of inputs to a job worker need not be absolute, and job-work clearance does not by itself make the goods non-excisable or deny exemption. The Trade Notice on job-work clearances supported this view, and the lower authority's insistence that the job worker comply with excise formalities as if manufacturing independently for sale was found unsustainable. On that basis, the demand and penalty were not sustainable.

---

---

Issues: Whether hollow screws manufactured by a job worker from inputs supplied by the principal manufacturer under Rule 57F(2) were to be treated as goods manufactured by the appellant for the purpose of excise duty and small scale exemption, and whether the demand and penalty could be sustained.

Analysis: The goods were sent by the appellant to a job worker and were received back as an intermediate product used captively in the manufacture of injectors or sold as such. The valuation and treatment of goods sent on job work basis had to be understood in the light of the settled principle that transfer of inputs to the job worker need not be absolute. The exemption scheme and the Trade Notice dealing with job-work clearances showed that the mere fact that the goods were manufactured on job work basis did not make them non-excisable or disentitle the principal manufacturer from the relief claimed. The lower authority's approach that the job worker had to observe excise formalities as if the goods were independently manufactured for sale was held to be unsustainable.

Conclusion: The demand and penalty were not sustainable and the appeal succeeded.

---