Job-work use of rubber adhesive did not justify duty demand where intermediate product fed final manufacture.

Rubber adhesive sent to a job worker under Rule 57F(2) and used to make an intermediate product later consumed in manufacturing the final product was not liable to duty merely because it was treated as a fully finished product or partly cleared on payment of duty. The Tribunal accepted the undisputed factual position that the adhesive was used in the job-work chain and that the resultant intermediate product was brought back and used in the appellants' factory. On those facts, the mere characterization of the adhesive or partial clearances did not justify the demand, and the duty demand was held unsustainable.

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Issues: Whether rubber adhesive, sent to a job worker under Rule 57F(2) and used in the manufacture of an intermediate product that is ultimately converted into the final product, could be subjected to duty merely because it was treated as a fully finished product or partly cleared on payment of duty.

Analysis: The Tribunal noted that the Revenue did not dispute the essential factual position that the rubber adhesive was sent for job work and was used in manufacturing an intermediate product by combining it with rubber compound, and that the resulting product was thereafter used in the appellants' factory for manufacture of the final product. On these facts, mere characterization of the rubber adhesive as a fully finished product, or the circumstance that some quantity was also sold or cleared on payment of duty, was held insufficient to justify the demand.

Conclusion: The demand of duty on the rubber adhesive was unsustainable and the issue was decided in favour of the assessee.

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