Job-work goods and minor ancillary processing did not by itself make the assessee the manufacturer; duty demand failed.

Goods sent to job workers and received back after minor ancillary operations such as punching and drilling were not treated as having been manufactured by the assessee merely because of those later processes. The commentary states that Rule 57F(2) was not limited to cases where the process did not amount to manufacture, and that identification of the intermediate goods through the prescribed challan procedure was sufficient. It also notes that the job workers' own position as manufacturers supported the view that the manufacturing stage had already been completed earlier. On that basis, the duty demand and penalties were not sustainable.

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Issues: Whether the goods sent to job workers and received back after further minor operations were liable to be treated as manufactured by the assessee so as to sustain the duty demand, and whether Rule 57F(2) restricted its operation only to cases where the process did not amount to manufacture.

Analysis: The goods were moved in two streams, one with Modvat credit and one without, but both were processed through job workers and received back under challans. The further operations performed by the assessee were only minor ancillary operations such as punching and drilling. Such ancillary work did not by itself establish that the assessee became the manufacturer of the goods. The rule was not confined in the narrow manner adopted in the impugned order, and finished identification of intermediate goods was sufficient for the statutory procedure. The fact that the job workers held themselves out as manufacturers also supported the view that the manufacturing burden had already been discharged at that stage.

Conclusion: The duty demand and penalties could not be sustained, and the assessee succeeded.

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