By TIOL News Service

AHMEDABAD, MAY 20, 2014: DURING the course of preventive checks in the appellant's unit it was observed that the appellants had received goods from their principal manufacturers for carrying out job work. The appellants, instead of clearing goods manufactured out of the said raw materials received from their principal manufacturers, cleared their own manufactured finished goods under the cover of job work challans to the principal manufacturers during period from May to November, 2007.

Naturally, a SCN demanding CE duty of Rs.12,66,230/- came to be issued and the same was confirmed by the adjudicating authority along with mandatory penalty, interest and a penalty of Rs.3.17 lakhs was imposed on the partner u/r 26 of the CER, 2002.

The lower appellate authority upheld the order except the penalty imposed on the partner which was reduced.

Against this order, the appellant is before the CESTAT.

It is submitted that due to exigency at the end of the principal supplier they had cleared their manufactured goods under job work challans but subsequently the appellant had discharged Central Excise duty on the copper rods which were cleared by them and which were manufactured out of job worked items. Thus it is a revenue neutral exercise. Furthermore, although the investigation took place in November, 2007, the SCN came to be issued in July, 2011 only and is, therefore, time barred. It is also submitted that the offence is a case of procedural violation and there cannot be any duty demand. Reliance is placed on the decisions in M/s Castwell Metal Industries - 2002-TIOL - 440-CESTAT-KOL, Uniworth Textile Ltd - 2013-TIOL-13-SC-CUS, Pals Microsystems Ltd - 2011-TIOL-70-SC-CX.

The Revenue representative reiterated the findings of the lower authorities and the submissions made by the partner of the firm that they have cleared their own finished goods under the job work challans.

The Bench distinguished the cases cited by the appellant and observed –

+ The lower authorities were correct in holding that the appellant should discharge the duty liability as the procedure for functioning under the job work is different and clearance of finished goods manufactured in the appellant's factory from his own raw materials' is different.

+ Argument of Revenue neutrality has to be also discarded as the question of Revenue neutrality would arise only when the activities of clearance takes place within the sister concern or their own units.

Holding that there is no merit in the appeals, the same were rejected.

(See 2014-TIOL-553-CESTAT-AHM)