Job-work manufacturer remains liable as manufacturer, but duty cannot be based on customer's later sale price

In a job-work arrangement, the processor remained the manufacturer for excise purposes even though the customer supplied plant, machinery, raw materials, specifications and brand name. The department failed to show that the customer was the manufacturer or that the relationship was anything other than principal-to-principal, and it did not proceed against that entity. On that basis, duty could not be assessed on the customer's later sale price, and the related demand for interest and penalty was not sustainable.

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Issues: Whether the appellant, engaged in manufacturing goods on job work basis with plant and machinery and specifications supplied by another company, was the actual manufacturer liable to duty on the basis of the principal's sale price; and whether the demand of duty, interest and penalty could be sustained.

Analysis: The appellant was a private limited company and the fact that the other company supplied plant and machinery, raw materials, specifications and brand name did not by itself establish that the appellant was a dummy or that the relationship was anything other than on a principal-to-principal basis. The department had not produced cogent evidence to show that the other company was the manufacturer, nor had it proceeded against that entity. The Tribunal applied the principle that where goods are processed on the customer's specifications, with materials and machinery supplied by the customer, the processor remains the manufacturer for excise purposes, and the assessable value cannot be adopted on the basis of the price at which the customer later sells the goods.

Conclusion: The appellant was held to be the manufacturer, and the duty demand based on the subsequent sale price of the other company was not sustainable. The penalty and interest also could not survive.

Final Conclusion: The appeal succeeded and the order confirming duty, interest and penalty was set aside with consequential relief.

Ratio Decidendi: In a job-work arrangement, where the processor manufactures goods to the customer's specifications even using the customer's plant, machinery, raw materials and brand, the processor is the manufacturer for excise purposes, and the duty cannot be assessed on the customer's later sale price absent evidence that the customer is the real manufacturer.

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