Excise duty lies on the manufacturer, not the trader, where goods are processed on unidentified job work.

Excise liability attaches to the manufacturer of goods, not to a trader or procurer who merely supplies raw materials for job work. Where shopkeepers did not themselves process the goods and the actual manufacture was carried out by unidentified processors, the scheme of Rule 7 and Rule 9(2) of the Central Excise Rules, 1944 did not support recovery from the shopkeepers. Duty could be fastened only on the manufacturer-processor, so the demand against the shopkeepers was not recoverable and the challenge to restore the original demand failed.

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Issues: Whether duty could be demanded from the shopkeepers who had received non-duty-paid goods, when the goods were supplied as raw materials for processing on job work and the actual manufacture was carried out by unidentified processors.

Analysis: The demand of duty was examined in the light of the principle that excise liability attaches to the manufacturer of the goods. The shopkeepers had not themselves processed the goods. They had only supplied raw materials for job work to mills which were not identified. On these facts, the statutory scheme under Rule 7 and Rule 9(2) of the Central Excise Rules, 1944 supported the view that duty could be fastened only on the manufacturer-processor and not on the procurer or trader of the goods.

Conclusion: Duty was not recoverable from the shopkeepers. The departmental challenge to restore the original duty demand failed.

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