Job-work exemption under amended Notification 214/86-C.E. covers capital goods used in manufacture, sustaining relief from duty demand.

Notification No. 214/86-C.E., as amended, was applied to capital goods sent for job work where the job worker's activity constituted manufacture and the prescribed procedure had been followed. The earlier exclusion of machines, machinery, plant, equipment and similar items was replaced by a narrower exclusion confined to specified packaging materials and containers, so capital goods were no longer barred merely because they were used in or in relation to manufacture of final products. On that basis, the duty demand and penalties were held unsustainable, and limitation was not examined.

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Issues: Whether the benefit of Notification No. 214/86-C.E., as amended, was available to capital goods sent for job work and used in relation to manufacture of the final products, so as to exclude duty demand and penalties.

Analysis: The activity undertaken by the job worker was not disputed to amount to manufacture. The dispute was confined to the availability of exemption under Notification No. 214/86-C.E. As originally issued, the notification excluded machines, machinery, plant, equipment, apparatus, tools and appliances from the expression "said goods". That exclusion was substituted by Notification No. 68/95-C.E., and the substituted text confined the exclusion to specified packaging materials and containers. After the amendment, capital goods were no longer excluded merely because they were used in or in relation to the manufacture of final products. The record also did not show non-compliance with the procedural conditions of the notification, and the earlier order had recorded observance of the procedure under Rule 57S and the notification.

Conclusion: The benefit of Notification No. 214/86-C.E., as amended, was available to the goods manufactured on job work, and the duty demand could not be sustained. The appeals succeeded, and the Tribunal did not go into limitation.

Final Conclusion: The impugned duty demand and penalties were set aside on the footing that the amended job-work exemption covered the capital goods involved.

Ratio Decidendi: Where a later amendment to a job-work exemption notification removes the prior exclusion of capital goods, and the goods are used in relation to manufacture in accordance with the prescribed procedure, the exemption cannot be denied merely because the goods are capital goods rather than inputs.

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