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Issues: (i) whether the process of insulation of bare copper wire into winding wire amounted to manufacture and attracted central excise duty; (ii) whether, in job work undertaken under Notification No. 214/86-CE, the duty liability shifted to the principal manufacturer; (iii) whether the demand was barred by limitation.
Issue (i): whether the process of insulation of bare copper wire into winding wire amounted to manufacture and attracted central excise duty.
Analysis: The activity of converting bare copper wire into winding wire by enamel insulation was treated as a non-manufacturing process. The reasoning was supported by earlier decisions holding that such wire-processing activity did not result in manufacture. Since the process itself did not amount to manufacture, no central excise duty could be demanded from the job worker.
Conclusion: This issue was decided in favour of the assessee.
Issue (ii): whether, in job work undertaken under Notification No. 214/86-CE, the duty liability shifted to the principal manufacturer.
Analysis: The work was carried out pursuant to the undertaking filed by the principal manufacturer under the notification, and the prescribed job-work procedure was followed. In such a situation, the duty liability, if any, was held to rest with the principal manufacturer supplying the inputs, not with the job worker. The cited authorities on job work under Notification No. 214/86-CE were relied upon to hold that the principal manufacturer was liable where the statutory conditions were satisfied.
Conclusion: This issue was decided in favour of the assessee.
Issue (iii): whether the demand was barred by limitation.
Analysis: The matter was decided on merits, and no finding was rendered on limitation.
Conclusion: This issue was not adjudicated.
Final Conclusion: The duty demand and penalties could not be sustained because the process was not manufacture and, in any event, the job-work liability under the notification rested with the principal manufacturer. The appeals were allowed.
Ratio Decidendi: Where processing of goods does not amount to manufacture, no excise duty is payable by the job worker, and under Notification No. 214/86-CE the duty liability on job-work clearances lies with the principal manufacturer when the notification conditions are fulfilled.
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