It may not be possible for an industry to carry all processes leading to manufacture of final product within its own premises. In such an eventuality the unit will have to get the work done (i.e. processing of the raw materials or intermediate product) from outside. The processes performed outside are called ‘job work’. The provisions contained in the law in respect of job work are as follows

Rule 56B – Special procedure for removal of finished excisable goods or semi- finished goods for certain purposes.

Under this Rule, an assessee can send semi-finished excisable goods for carrying out certain manufacturing processes or excisable goods for carrying out tests, with a prior permission of the Assistant Commissioner, to a job worker without payment of duty and to bring them back or remove them to another registered premises for removal on payment of duty or for export. The provisions of this Rule do not apply to the goods known as ‘prototypes’ sent out for trial or development tests. The benefit of this provision is available in respect of semi-finished excisable goods only if the manufacturing process to which such goods are subjected, does not result in a change in the sub-heading in which the goods have been classified.

The removal of inputs or partially processed inputs is governed by the provisions of Rule 57F(4) of the Central Excise Rules, 1944. The inputs and partially processed inputs can be removed for the purposes of test, repair, refining, reconditioning or carrying out any other operation necessary for the manufacture of final products or for manufacture of intermediate products necessary for the manufacture of final products. The inputs or the partially processed inputs after they are subjected to the requisite process are to be brought back to the factory within 180 days and are either to be used in the manufacture of final product or removed after payment of duty for home consumption or for export under bond. The inputs or partially processed inputs after they have been subjected to the requisite process and brought back to the factory, can be removed without payment of duty to a unit in Free Trade Zone or to a 100% EOU or to a unit in Electronic Hardware Technology Park or Soft ware Technology Parks or supplied to the United Nations or an International Organisation for their official use or supply to projects funded by them, on which exemption of duty is available under notification no. 108/95-CE dated 28.8.95.

The waste generated during the process performed outside the factory, is required to be returned to the factory. However, the requirement can be dispensed with, if the excise duty leviable on such waste, is paid.

The removal of inputs or partially processed inputs under Rule 57F(4) is undertaken after debiting an amount equal to 10% of the value of such inputs or the partially processed inputs. The amount can be debited either in the RG-23A Pt.-II account or in the current account. The manufacturer can take credit of the amount thus debited when the entire quantity inputs or partially processed inputs minus the waste generated if any, is received back in the factory, in the RG-23A Pt.-II account.

If the inputs or partially processed inputs are not received back in the factory of manufacture of final products within a period of 180 days, the manufacturer is to recalculate the amount of credit attributable to such inputs or on inputs contained in the partially processed inputs. The adjustment of differential amount if any, after taking into account of the amount already debited while sending the inputs or partially processed inputs from the factory, is thereafter made.

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

1. 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

2. cleared as such from the factory of the supplier of the raw materials or semi finished goods –

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.

3. clears them for home consumption on payment of duty; or
4. 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.

These two notifications are meant to facilitates SSI units in getting job work done from other units. SSI units send inputs or semi finished goods for manufacture or processing on job work basis. The goods received from the job worker are used by the SSI unit for further manufacture. Notification no.84/94 provides that a Small Scale Unit availing benefit of notification 8/98 and 9/98 can send any specified input without payment of duty to the job worker on the condition that the goods would be used for further manufacture by the SSI on their return and that in the event of failure the excise duty if any, payable on such goods, shall be paid by the supplier of the raw materials or semi finished goods. Also, the goods manufactured by the SSI out of the returned goods should be wholly or partially exempt, i.e. the value of clearances of the SSI should be below Rs.100 lakhs or Rs. one crore, for it to be eligible for this benefit.

Notification no.83/94 provides that the job worker will not be required to pay any excise duty if the specified goods received by him are used for making specified goods on job work basis and returned to the supplier for further manufacture. The supplier of the goods is required to give an undertaking to the proper officer having jurisdiction over the factory of the job worker that the specified goods received from the job worker will be used in the factory of the supplier in or in relation to the manufacture of specified goods which are exempt from the whole of the duty of excise leviable thereon under the Small Scale exemption notification and that in the event of his failure to do so he would pay excise duty, if any, payable on such goods. The waste generated during the course of job work is to be used in the manufacture of specified goods either within the factory of the job worker or within the factory of the supplier of specified goods for job work.

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