Job-work under Central Excise rules preserved despite direct raw material movement and faulty records

Rule 57F(3) of the Central Excise Rules, 1944 was applied to a job-work arrangement where raw material was sent directly for processing and the intermediate product was then used for further manufacture within the same corporate group. The direct movement of raw material to the first processing site did not by itself defeat the statutory facility, and the record did not establish that the intermediate product was not received or used in manufacture at the second factory. Inaccurate statutory records, without more, were insufficient to deny the substantive benefit. The demand of duty, confiscation and penalties were therefore not sustainable.

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Issues: Whether the assessee was entitled to the benefit of Rule 57F(3) of the Central Excise Rules, 1944 where the raw material was sent directly to the job worker and the intermediate product was moved for further manufacture within the same corporate entity, and whether duty and penalties were sustainable.

Analysis: The arrangement disclosed to the department showed that the raw material was intended to be processed directly at the Panoli factory and the intermediate product was to be used in the Silvasa factory for manufacture of the final product. The mere fact that the raw material did not first pass through the Silvasa factory did not defeat the statutory facility, because the rule was intended to cover such job-work arrangements. The record did not support the finding that the intermediate product was not received or utilised for manufacture at Silvasa, and the incorrect entries in the statutory records could not by themselves justify denial of the substantive benefit otherwise available under the rule.

Conclusion: The assessee was entitled to the benefit of Rule 57F(3), and the demand of duty, confiscation, and penalties were not sustainable.

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