Job Work

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Hemant (Querist)
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20 February 2010 What is the difference between sending goods job work under Notification No. 214/86 and Rule 4(5) of the Cenvat Credit Rules?

ANIL JANGID

ANIL JANGID (Expert)
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21 February 2010 Procedure under notification no.214/86-CE dated 25.3.86 (as amended).

This notification exempts specified items, if manufactured in a factory on job work basis. The exemption is available to the job worker only if the supplier uses the returned goods in the following manner

in or in relation to the manufacture of specified final products, or
i) on which duty of excise is leviable in whole or in part; or

ii) for removal to a unit in a Free Trade Zone or to a 100% EOU or to a unit in Electronic Hardware Technology Park or Soft Technology Parks or for supply to the United Nations or an International Organisations for this official use or for supply to the projects funded by them, on which exemption of duty is available under notification no.108/95-CE dated 28.8.95; or

iii) for removal under bond for export

cleared as such from the factory of the supplier of the raw materials or semi finished goods â€“
i) on payment of duty for home consumption; or

ii) without payment of duty under bond for export;

iii) without payment of duty to a unit in a Free Trade Zone or to a 100% EOU or to a unit in Electronic Hardware Technology Park or Soft Technology Parks or for supply to the United Nations or an International Organisations for this official use or for supply to the projects funded by them, on which exemption of duty is available under notification no.108/95-CE dated 28.8.95.

clears them for home consumption on payment of duty; or
sends them to another job worker for being used in the manner given at (a), (b) or (c) above.
Also the supplier is required to give an undertaking to this effect and to the effect of discharging the duty liabilities in respect of a final product, to the Assistant Commissioner of Central Excise having jurisdiction over the factory of the job worker. The supplier is also required to produce evidence that the said goods have been used or removed in the manner undertaken.

As per Rule 4(5)(a) of CENVAT Credit Rules 2003, the CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, reconditioning, etc. However, if the inputs or capital goods are not received back in the factory within 180 days of their being sent to a job worker, the manufacturer is required to pay an amount equivalent to the CENVAT credit taken on the inputs/Capital goods.

Audit of many units has revealed that the inputs sent for job work are not being received back within 180 days and therefore, the CENVAT credit taken on such inputs is required to be debited immediately which is not being done by many units. However, the manufacturer can take the CENVAT credit again when the inputs or Capital goods are received back in his factory.