duty is on manufacture, duty liability arises only when the goods are
manufactured during job work. Where the goods are manufactured during job work,
the job worker would be liable to pay duty of excise on the goods so
manufactured unless the principal manufacturer who has supplied him the goods
for job work, furnishes a declaration under Notification 214/86 dated
25.03.1986 which exempts goods manufactured by a job worker from duty of
excise provided the said goods after job work are returned to the principal or
cleared for export or cleared for home consumption on payment of duty of excise.
Where the goods are returned to the principal, the principal should either
clear it on payment of duty or use it in his manufacturing process which should
result in a dutiable product being manufactured. The declaration should be
given to the Assistant Commissioner of Central Excise who has jurisdiction over
the factory of the job worker.
Valuation of Excisable Goods if Job Work is Liable for
If he Job
worker is liable to pay Duty, one of the common issues confronting job workers
is that of valuation. The assessable value for the purpose of charging excise
duty has to comprise the value of raw materials supplied by the principal plus
the conversion charges or job charges incurred by the job worker plus his
Valuation of Excisable Goods if the manufacturer is
liable for Duty Payment
Sale from Job Worker Factory
A per new Rule
10A where the goods are sold by the raw material supplier/principal
manufacturer from the factory of job worker, the assessable value have to
be the transaction value of the goods so sold by the raw material
supplier/principal. This will apply only when the raw material supplier and the
buyer of the goods are not related and price is the sole consideration for the
sale and the goods are sold for delivery at the time of removal from the job
Sale after Removal of Goods (transfer to other location) from Job Worker
In this case
goods are not sold by the principal manufacturer at the time of removal of
goods from the factory of job-worker, but are transferred to some other place
from where the goods are sold. The value of the goods is determined based on
the normal transaction value of such goods sold from such other place at or
about the same time.
In other words,
can follow the principle of depot based valuation under Central Excise
applicable where goods are cleared to depots of manufacturers and sold there from.
Where such goods are not sold at or about the same time, then the normal
transaction value of such goods at the time nearest to the time of removal of
said goods from the factory of job-worker, is to be adopted. The cost of
transport from the premises where from the goods are sold, to the place of
delivery, would not be included in assessable value.
principal manufacturer is responsible for the duty payment on the scrap
generated at the job worker’s premises.
The job worker
may also remove such scrap on payment of appropriate duty of excise and in
which case principal manufacturer will be relieved from his duty liability. The
principal manufacturer should therefore have a proper mechanism for the purpose
of tracking the quantum of waste or scrap generated at the job worker’s
By-Products and Co-Products
Under Job work
if any By-product or Co-product is manufactured, depending on the
agreement between the Principal and the Job worker, product may be returned to
the principal or sold to the job worker or to the third party.
Cenvat Credit Availing in case of Job Work
can be availed on materials sent for job work as per rule 4(5)(a) of the Cenvat
Credit Rules, 2004. It has to be established from the records, Challans or
memos or any other document produced by the manufacturer taking the Cenvat
credit that the goods have been received back in the factory within one
hundred and eighty (180) days of goods being sent to the job worker.
Hence, proper inventory accounting records, job work register, details of
nature of processing undertaken and quantities received back
along with scrap generated would gain importance.
should be under a Challan giving the particulars as to the Rule
under which the same is being sent. The Challan would be in triplicate with two
copies of the same accompanying the goods to the job worker who would return
one copy with the goods being sent back to the principal after completion of
the process. Where the goods are sent back in lots, he is free to send his own
delivery Challan with the goods and send back the original delivery Challan
received from the principal, with the final consignment being sent to the said
If the inputs
or the capital goods are not received back within one hundred and eighty days,
the manufacturer shall reverse the CENVAT Credit availed towards the inputs or
Capital Goods. Later, manufacturer can take Cenvat credit when the inputs
or capital goods are received back in his factory.
credit shall also be allowed in respect of fixtures, moulds and dies
sent by a manufacturer of final products to a job worker for the production of
goods on his behalf and according to his specifications. The restriction with
regard to the requirement of receiving the goods back within 180 days from the
date of sending would not apply to such tools, dies, fixtures and moulds.