Job work

the job work activity attracts no Excise Duty. It is exempted from payment of excise duty.

hence the proportionate cenvat credit taken on raw material and packing material used in

the job work will have to be reversed 

According to Rule 2(n) of the Cenvat Credit Rules 2004, “Job work” means processing or working upon of raw material or semi-finished goods supplied to the job worker, so as to complete a part or whole of the process resulting in the manufacture or finishing of an article or any operation which is essential for aforesaid process and the expression “job worker” shall be construed accordingly”.

From the above one can conclude that the job worker mainly contributes labour and skill done with the help of their own tool or machinery.  But, when the job worker contributes his own material to the article supplied by the customer and manufactures different goods, it does not amount to manufacture.

Here the criteria is the quantum of raw material / packing material used by you for job work.  If you are using considerable amount of your own raw material / packing material, it is better to review the process.

If you do not wish to get into any litigation in future, please pay the applicable excise duty on your final products.

SINCE THE SEMI PROCESSED GOODS WERE RECEIVED ON PRESCRIBED JOB WORK CHALLAN FROM THE REGISTERED MANUFACTURER THUS IF YOU USED THE INPUT DURING THE MANUFACTURING PROCESS, THEN YOU ARE ENTITLED FOR THE INVOLVED CENVAT CREDIT. EVEN OTHERWISE IT IS LOGICAL THAT YOU WILL CHARGE THE JOB WORK CHARGES INCLUDING THE INPUT USED AND YOUR JOB WORK CHARGES SHALL MERGED WITH THE VALUE OF GOODS AT THE END OF PRINCIPAL MANUFACTURE. IN OTHER WORDS, SHALL SUFFER THE APPLICABLE EXCISE DUTIES.