Raw materials supplier is not the manufacturer where independent job workers actually produce goods on job charges basis.

A supplier of raw materials does not become the manufacturer of finished goods merely because the goods are produced by independent job workers to supplied drawings and specifications. Liability to central excise duty and penalty cannot be fastened on the supplier unless the record clearly shows that the supplier itself undertook manufacture or that the job workers were only dummy or sham workers. On the stated facts, the materials supported manufacture by independent job workers on job charges basis, and the Revenue's challenge therefore failed, with consequential relief following in law.

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Issues: Whether the assessee, who supplied raw materials and got Parnala manufactured through job workers, could be treated as the manufacturer of the goods and made liable to central excise duty and penalty.

Analysis: The finding was that the show cause notice did not contain any clear allegation establishing that the assessee itself manufactured Parnala. The record also did not show that the job workers were mere dummy labourers of the assessee. On the contrary, the materials on record supported that the goods were produced by independent job workers on job charges basis, with raw materials supplied by the assessee. In such circumstances, mere supply of raw materials, drawings and specifications does not make the supplier the manufacturer unless it is proved that the manufacturing was done by the assessee itself through sham job workers.

Conclusion: The assessee was not the manufacturer of Parnala and the duty liability could not be fastened on it on that basis.

Final Conclusion: The Revenue's challenge failed, and the assessee remained entitled to the consequential reliefs available in law.

Ratio Decidendi: A supplier of raw materials does not become the manufacturer of the finished goods merely because the goods are produced by job workers to supplied design and specifications, unless it is shown that the job workers were only dummy workers or that the assessee itself undertook the manufacture.

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