Pradeep Jain - Chartered Accountant

Sir, We require an assembly which we get done from our small job worker. We are buying three types of inputs to make assembly from it and availing cenvat credit on the same. For assembly purpose we are sending these inputs to our job worker on 4(5)(a) chalan. While making assembly job worker utilizes his material i.e. some steel, fabrication material, etc and make the assembly. For this job he is raising two invoices one for service job done and another for material used by them and put in to together to make assembly duly charging excise duty. At the time of excise audit at job worker’s end, auditor has raised query that, excise should be charge on total material value involve plus profit element if any. While our job worker is charging duty on cost of material used by them plus his margin. Whether our jobworker need to pay duty on the value as suggested by excise auditor? Please guide.

It is submitted that under the provisions of Rule 4(5)(a), the job worker need not to pay the duty at all and principal manufacturer will pay the duty on the finished goods. Even if the some material has been used by job worker then also duty is not payable. Even the Mumbai High Court has held in case of Sterlite Industries [2009 (244) ELT A89 (BOM)] that the credit inputs used by job worker will be allowed as the principal is paying duty ultimately on the finished goods. Moreover, if the principal takes permission to clear the goods from premises of job worker on payment of duty under Rule 4(6) then also the liability to pay duty will be of principal only. Even in case of such permission, the normal procedure prescribed by the department is that the principal will prepare the invoice and leave the date and time of removal blank. He will send "original for buyer" and Duplicate for transporter" copy of this invoices to job worker. He will fill the date and time of removal will clearing the goods and tell the same to principal manufacturer. He will also fill the same in "triplicate for assessee" copy of invoice. {Query replied by:- CA Neetu Sukhwani & Prayushi Jain}

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