Job-work manufacturing and excise duty require strict exemption compliance when supplier undertakings under Notification 214/86 are absent.

Goods manufactured on a job-work basis may still attract central excise duty where the job worker is treated as the manufacturer and the relevant exemption conditions are not satisfied. The text notes that Notification No. 214/86 requires compliance through the raw material supplier's undertaking to the Assistant Commissioner; where the supplier is not a manufacturer and no valid undertaking is given, the notification cannot be relied on. It also states that small-scale exemption does not automatically exclude duty on job-work clearances. On those facts, duty confirmation and penalty were upheld for non-payment of duty on such goods.

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Issues: Whether goods manufactured on job work basis, where the raw materials were supplied by non-manufacturers and the conditions of Notification No. 214/86 were not complied with, could escape duty liability and whether the job worker could avoid being treated as the manufacturer for excise purposes.

Analysis: Notification No. 214/86 applies where a manufacturer sends raw materials or semi-finished goods to a job worker after giving the requisite undertaking to the jurisdictional Central Excise authority that the goods manufactured by the job worker will be used in or in relation to the manufacture of the final product in his factory. The arrangement in question did not satisfy those requirements because the immediate suppliers of the raw materials were not manufacturers themselves and could not have complied with the notification in the manner prescribed. The goods returned to the original supplier were nevertheless used in the manufacture of the final product, and the absence of proper notification coverage did not alter the character of the job work clearance.

Conclusion: The job worker was correctly treated as the manufacturer for duty purposes, and the demand and penalty were sustainable. The appeal failed.

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