Job-work excise liability follows the manufacturer where the final goods emerge, not the raw material supplier.

In a job-work arrangement, excise duty attaches to the person who manufactures the final excisable goods at the place where they come into existence, not to the supplier of the raw material. C.I. castings were sent to independent processors for further machining into fly wheels, and there was no evidence that those processors were hired labourers of the supplier. The duty demand therefore could not be fastened on the supplier of the castings, and the treatment of the job workers as liable under Rule 173Q reinforced that they were the relevant manufacturers for duty purposes.

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Issues: Whether the duty demand on fly wheels could be sustained against the supplier of C.I. castings, or whether liability lay only on the persons at whose premises the fly wheels came into existence.

Analysis: The demand arose from a job-work arrangement in which C.I. castings were sent for further machining and conversion into fly wheels at the premises of independent processors. There was no evidence that those processors were hired labourers of the assessee. In a job-work situation, liability to excise duty attaches to the manufacturer at the stage and place where the excisable goods come into existence. Since the fly wheels emerged only at the premises of the job workers, the demand could not be fastened on the supplier of the castings. The penalty imposed on the job workers under Rule 173Q also supported the position that they, and not the assessee-supplier, were treated as the relevant manufacturers for duty purposes.

Conclusion: The duty demand was not sustainable against the assessee and the appeal was allowed.

Ratio Decidendi: In a job-work arrangement, excise duty is leviable on the person who is the manufacturer at the place where the final excisable goods come into existence, not on the supplier of the raw material.

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