Use of Inputs supplied by Principal Manufacturer is Essential to qualify as Job Worker: CESTAT quashes Excise Duty Demand [Read Order]

The Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Chandigarh Bench quashed the excise duty demand and ruled that the use of inputs supplied by principal manufacturer is essential to qualify as job worker.

The appellant, Punjab Telenet Cables Limited, entered into an agreement for manufacture and sale of the products with M/s Nilkamal Limited on principal-to-principal basis and the appellant used the raw material purchased by them but conforming to the specifications given by the buyers and from the moulds supplied by the buyers.

The appellants cleared the manufactured furniture to M/s Nilkamal Limited and the department was of the opinion that the appellants were job workers of M/s Nilkamal Limited as such they were required to pay duty on the sales price of M/s Nilkamal Limited at their depots.

Padmavati Patil, Counsel appearing on behalf of the appellant submitted that the contract and relationship between the appellants and M/s Nilkamal Limited is that of principal-to-principal basis and the moulds were supplied by M/s Nilkamal Limited on payment of duty to the appellants who availed the credit of the same and returned back to M/s Nilkamal Limited on payment of duty after use.

The Counsel further submitted that just because M/s Nilkamal Limited supplied the moulds, the appellants cannot be considered as “job workers”.

Manoj Nayyar, Authorised Representative for the Revenue submits that the provisions of Rule 10A of Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 are clear in defining the job worker and in view of the definition of job worker under Rule 10A, the appellant is liable to pay duty at the value on which goods were cleared by M/s Nilkamal Limited at their depots.

The Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member observed that “The crux of the definition of job worker is in the use of inputs supplied by the principal manufacturer. We find that there is nothing in the contract to show that the appellants have manufactured the goods “on behalf” of M/s Nilkamal Limited despite the facts that the entire manufactured goods were sold to M/s Nilkamal Limited. Moreover, the goods are not manufactured from any inputs or goods supplied by the principal manufacturer i.e. M/s Nilkamal Limited.”

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