Job worker liability for undervaluation fails absent knowledge, participation, or collusion in the merchant manufacturer's declarations.

Demand and penalty against a job worker were held unsustainable where price declarations were filed on the basis of declarations made by merchant manufacturers and had been accepted by the department. Because the merchant manufacturers themselves admitted undervaluation and there was no finding that the job worker knew of, participated in, or colluded in the undervaluation, no duty could be fastened on the processor. In the absence of any allegation or evidence of knowledge, deliberate non-disclosure, or connivance, the extended period could not be invoked. The demand and consequential penalties were therefore not sustainable.

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Issues: Whether the demand and penalty against the job worker could be sustained where the price declarations were filed on the basis of declarations made by the merchant manufacturers and there was no finding that the job worker knew of, participated in, or colluded in any undervaluation.

Analysis: The declarations filed by the appellants were based on the declarations furnished by the merchant manufacturers and had been accepted by the department without challenge. The record also showed that the merchant manufacturers admitted undervaluation of the grey fabrics and took responsibility for it. In such circumstances, there was no legal requirement for the processor to verify the correctness of the merchant manufacturers' declarations, and in the absence of any allegation or finding of knowledge, deliberate non-disclosure, or connivance on the part of the job worker, the demand could not be fastened on the processor. The same reasoning also negatived invocation of the extended period.

Conclusion: The demand and consequential penalties were not sustainable against the appellants and the appeal was allowed.

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