Central Excise Rules, 2002 provides various provisions for sending inputs / semi finished goods / finished goods outside for Job Work, testing etc. under rules 16A, Rule 16B and Rule 16C.

Rule 16A deals with ""Removal of goods for job work, etc."" for  further processing, testing, repair, re-conditioning or any other purpose.

Rule 16B deals with  ""Special procedure for removal of semi-finished goods for certain purposes.""  for carrying out certain manufacturing processes.

Rule 16C deals with ""Special procedure for removal of excisable goods for carrying out certain processes."" for carrying out tests or any other process not amounting to manufacture.

In all the rules as described above, the permission is being granted by the Commissioner of Central Excise having jurisdiction over the factory premises. While granting the permission, the Commissioner of Central Excise may put certain conditions to be fulfilled by the manufacturer sending the goods outside for specified purpose. Now there was a fear in the field that the Commissioner may put some conditions which make the procedure of sending goods outside for job work or for other process difficult.

To alienate the fear, the CBEC has issued a Circular No.844/02/2007-CX dated  31-1-2007, prescribing the conditions that may be imposed by the Commissioner under Rule 16C. These conditions are in line with  sub-rules (2),(3),(4) & (9) of rule 12AA of the Central Excise Rules, 2002. Therefore a manufacture intending to send the excisable goods for carrying out certain processes under rule 16C has to follow the follow the following guidelines: -

1. Manufacture shall prepare an invoice in the manner referred to in rule 11, date and time of removal shall left blank.
2. Duty shall be paid in the matter specified in rule 8
3. The original and duplicate copy shall be send to the premises of job worker along with the goods.
4. The job worker shall fill up the column of date and time of removal before clearance from his premises and intimate the supplier of the goods updating triplicate copy.
5. The effective rate of duty shall be the rate of duty in force on the date of removal of goods from the premises of the job worker.
6. The value of the goods shall be the value at which the manufacturer sell the goods to the buyer.
7. Proper records shall be maintained by the manufacturer and job worker.

Now, from the analysis of the above, it seems that the board has issued the above clarification in haste. Rule 16C permits clearance of goods without payment of duty. So in the name of uniformity, some unwarranted conditions has been imposed on the manufacturer. There is no reference in the circular where the goods are brining back in the factory premises of the manufacturer after the above mentioned process.

Further, rule 4(5) of the Cenvat Credit rules, 2004 permits a manufacturer to remove the goods without reversing Cenvat Credit or payment of duty to the premises of job worker. The process referred in rule 16C is also eligible process under rule 4(5).

Therefore, it seems that this circular is going to create more litigations in future and unnecessary harassment to the manufacturer.

For the purpose of Rule 16A, 16B and 16C of the Central Excise Rules, 2002, we make following suggestions: -

1. Discretionary power of the Commissioner of Central Excise must be dispensed with.
2. Permission should be granted generally.
3. Complete particulars of the job worker shall be furnished with the jurisdictional office of the manufacturer.
4. A periodical return of job work shall be furnished by the manufacture with the ER-1 / ER-3

The above suggestions may be incorporated in the relevant rules itself to make the intention more clear.

Job work procedures: prescribed invoice, duty and recordkeeping conditions may increase compliance burdens and litigation risk. Removals of inputs and goods for job work are subject to Commissioner imposed conditions per the circular: invoices with date/time left blank, specified duty payment procedures, transmission of invoice copies to the job worker who records date/time before clearance, duty rate fixed at the rate in force on re removal, valuation at the manufacturer's sale value, and mandatory recordkeeping by manufacturer and job worker.