2014 (8) TMI 441 - AT - Central Excise

Duty liability of Job worker - Manufacture - Job Work - process of stentering - the processed fabrics - Held that - Liability to pay duty in respect of goods moved under Rule 4(5)(a) is on the supplier of the goods and not on the job-worker. Therefore, notwithstanding the fact that the process fabrics are not included in Notification 214/86, the job-worker is not liable to discharge excise duty liability and any liability thereon is required to be discharged by the supplier of the raw materials. Rule 4(6) of the CENVAT Credit Rules makes it abundantly clear that, if the goods are required to be cleared from the job-worker s premises instead of being returned to the supplier, then the Commissioner can direct clearance of the goods on payment of duty from job-worker s premises. This would also indicate that the liability to discharge duty under the provisions of Rule 4(5)(a) is on the supplier of the goods and not on the processor of the goods. In this view of the matter, we find that the impugned order is not sustainable in law and merits to be set aside - Decided in favour of assessee.

Summary

Issues:
- Duty demand confirmation on processed fabrics
- Liability of job-worker for excise duty
- Interpretation of Rule 4(5)(a) of CENVAT Credit Rules, 2002
- Applicability of Notification 214/86-CE
- Return of processed goods within 180 days

Analysis:

The appeal challenged the Order-in-Appeal confirming a duty demand of &8377; 4,11,801/- along with interest and penalty on the appellant, a job-worker, for processing fabrics without discharging excise duty liability. The appellant received fabrics, processed them, and returned the goods to the supplier without paying duty. The department argued that the processing amounted to manufacture, making the job-worker liable for duty. The appellant contended that as per Rule 4(5)(a) of the CENVAT Credit Rules, 2002, the duty liability rests with the supplier, not the job-worker. The appellant cited precedents where similar situations absolved job-workers from duty liability under Rule 4(5)(a).

The Revenue argued that while Rule 4(5)(a) allows movement of goods for job-work without reversing credit, duty liability for the job-worker remains, especially since fabrics were not covered under Notification 214/86-CE. The Revenue also questioned the return of processed goods within 180 days, highlighting a lack of evidence. The Revenue supported the lower appellate authority's findings, asserting the sustainability of the duty demand on the job-worker.

The Tribunal examined the submissions and previous decisions, emphasizing that under Rule 4(5)(a), the duty liability for goods moved for job-work lies with the supplier, not the job-worker. The Tribunal clarified that even if the processed fabrics were not covered by Notification 214/86-CE, the job-worker is not responsible for excise duty. Rule 4(6) further confirmed that duty clearance from the job-worker's premises is the supplier's responsibility. Consequently, the Tribunal found the duty demand on the job-worker unsustainable in law and allowed the appeal, setting aside the impugned order.

In conclusion, the Tribunal ruled in favor of the appellant, establishing the supplier's obligation for duty payment on goods processed by job-workers under Rule 4(5)(a) of the CENVAT Credit Rules, 2002. The judgment clarified the distinction between the responsibilities of the supplier and the job-worker, emphasizing the supplier's liability for excise duty, even in the absence of specific notifications covering the processed goods.