Can one job worker can send the inputs and tools to another job worker for further process.

[Guest]

Dear Sir,

We are a manufacturer and we send our Inputs , tools and dies to our job worker for manufacture of product as per our specification. This job worker not registered under Central Excise.

My query is if this job worker wants to send our inputs, Tools and dies to some other job worker for doing the same job. Is it permissible as per Central Excise ? If yes please give me the reference any rule or notification etc.

Regards

Swapneswar Muduli

[Suryanarayana Sathineni]

Dear Friend,

This is possible and you may refer the guidelines issued earlier in this regard ( During Modvat Scheme).

As per this procedure and if my rememberence goes correct, the first job worker would issue supplementary challan to the second job worker and the second job worker would return the same against such challan to the first Job worker etc. As an abundant caution, you inform your intention to the department in writing quoting the reference of the guidelines issued by CBEC.

Regards

Suryanarayana

[Rajagopalan Ranganathan]

Sir,

Rule 4 (5) (i) of Cenvat Credit Rules, 2004 stipulates that-

"The CENVAT credit on inputs shall be allowed even if any inputs as such or after being partially processed are sent to a job worker and from there subsequently sent to another job worker and likewise, for further processing, testing, repairing, re-conditioning or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, chalIans or memos or any other document produced by the manufacturer or the provider of output service taking the CENVAT credit that the inputs or the products produced therefrom are received back by the manufacturer or the provider of output service, as the case may be, within one hundred and eighty days of their being sent from the factory or premises of the provider of output service, as the case may be:

In view of the above the inputs may be sent to a number of job workers but the processed inputs should be received back by the principal manufacturer within 180 days.

Tools and dies are classifiable as capital goods and the same shall be returned to the principal manufacturer within two years from the date of despatch to the job worker/first job worker vide rule 4 (5) (ii) of Cenvat Credit Rules, 2004.

[Ganeshan Kalyani]

I agree with the views submitted by Sri Rajagopalan Sir. The provision has been amended to allow credit in the manner explained by Sir. Thanks.

[KASTURI SETHI]

I concur with the views of both experts. At the same time I would like to add that Rule 4(5)(i) of Cenvat Credit Rules cannot be read in isolation. It is to be read with Notification No.214/86-CEas amended. Name & address of Second Job Worker is to be included in the undertaking by Principal Manufacturer (supplier) to the Asstt. Commissioner for intimation purpose. Intimation is must.After all entire responsibility is cast upon Principal Manufacturer who sends the goods for job work.

AI Summary

Job worker subcontracting permitted; inputs must be returned within prescribed statutory timeframes and principal remains liable. The Cenvat Credit Rules permit inputs sent to a job worker to be further sent to another job worker for further processing provided the inputs or resulting products are accounted for and received back by the principal manufacturer within the statutory return period; tools and dies, as capital goods, are subject to a longer capital-asset return period. The principal manufacturer must give the prescribed undertaking, intimate the department with the second job worker's details where required by the governing notification, and retain records and challans to evidence movements and returns.