Job-worker duty liability under Notification 214/86-C.E. depends on a principal's undertaking and dutiable final goods.

Notification No. 214/86-C.E. was treated as applicable only where a job-worker is the manufacturer and the principal undertakes to discharge duty on the job-worker's behalf for dutiable final products. On the stated facts, the final goods were exempt footwear, no undertaking by the principal was shown, and liability could not be fastened merely because intermediates were sent to job-workers and job charges were paid. The text also notes that the exemption position under Notification No. 10/96-C.E. did not need separate determination once no demand survived against the job-workers.

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Issues: Whether the appellant was liable to pay duty and penalty on intermediate goods processed by job-workers under Notification No. 214/86-C.E., and whether the demand could be sustained when the final goods were exempted footwear and no undertaking to discharge duty on behalf of the job-workers was shown.

Analysis: The allegations in the show cause notice did not assert that the appellant was the actual manufacturer of the intermediate goods, and therefore the appellant had no occasion to meet that case. Notification No. 214/86-C.E. operates on the footing that the job-worker is the manufacturer and the principal undertakes to discharge the duty liability on its behalf; it is intended to shift the duty burden only where the finished goods are dutiable. Here, the final goods were exempted footwear, the Department could not produce any undertaking by the appellant under the notification, and the appellant's liability could not be fastened merely because inputs were sent to job-workers and job charges were paid. The claim regarding exemption under Notification No. 10/96-C.E. was also noticed, though it was not necessary to decide that question once no demand lay against the job-workers who manufactured the intermediates.

Conclusion: The appellant was not liable under Notification No. 214/86-C.E., the duty demand and penalty were unsustainable, and the demand could not be imposed on the appellant as the manufacturer of the intermediate goods.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the duty demand and penalty failing in entirety.

Ratio Decidendi: Notification No. 214/86-C.E. applies only where the principal undertakes to discharge duty on behalf of a job-worker in respect of dutiable final goods, and in the absence of such undertaking the principal cannot be treated as liable for duty on intermediate goods manufactured by the job-worker.

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