Job work exemption under Notification No. 214/86-C.E. upheld where one raw material was market-purchased and the demand failed.

Manufacture of Aluminium Sulphate was held to qualify as job work under Notification No. 214/86-C.E. even though the assessee procured one raw material from the market, because the notification did not require every input to be supplied by the principal manufacturer. The principal manufacturer had supplied Alumina Hydrate, which was processed with Sulphuric Acid into the final product, and no breach of the notification conditions was shown. The Tribunal also noted that denial of exemption would have been revenue neutral because duty would pass to the principal manufacturer with corresponding Cenvat credit. The exemption was upheld and the demand and penalty were unsustainable.

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Issues: Whether the assessee's manufacture of Aluminium Sulphate under Notification No. 214/86-C.E. remained eligible as job work when the principal manufacturer supplied one raw material and the assessee procured another raw material from the market, and whether the demand was otherwise sustainable.

Analysis: The exemption under Notification No. 214/86-C.E. applies to goods manufactured in a factory as job work where the processing is of raw materials or semi-finished goods supplied to the job worker. The explanation to the notification does not require that every raw material used in manufacture must be supplied by the principal manufacturer. The earlier decision dealing with Notification No. 119/75-C.E. was held inapplicable because the definition of job work in that notification was differently worded. Here, the principal manufacturer supplied Alumina Hydrate, which was processed by the respondent with Sulphuric Acid to produce the final goods, and the conditions of the notification were not shown to have been breached. The Tribunal also noted that denial of the exemption would have resulted in duty being passed on to the principal manufacturer with corresponding Cenvat credit, making the exercise revenue neutral.

Conclusion: The process undertaken by the respondent fell within the definition of job work under Notification No. 214/86-C.E., and the benefit of the notification was rightly extended; the demand and penalty were not sustainable.

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