Job worker liable for duty on goods due to principal manufacturer's non-compliance. Precedents not applicable.

The Tribunal held that the job worker (Thermax) is liable to pay duty on intermediate goods for the principal manufacturer (Babcock) when the latter fails to follow the prescribed procedure under Notification No. 214/86-CE. Despite precedents indicating job workers' exemption if the principal manufacturer fulfills obligations, in this case, the job worker was deemed responsible due to non-compliance. The Tribunal directed the appeals to the referral bench for further action.

---

---

Issues: Whether a job worker manufacturing intermediate goods from inputs supplied by the principal manufacturer is liable to pay central excise duty when the principal manufacturer clears the final product without duty and the conditions of Notification No. 214/86-CE are not fulfilled.

Analysis: Rule 4(5)(a) of the Cenvat Credit Rules, 2001 regulated removal of inputs to a job worker and credit availment by the principal manufacturer. It did not, by itself, grant an exemption from duty on goods manufactured by the job worker. Rule 4(6) only enabled clearance of final products from the job worker's premises subject to permission and conditions, and did not shift the incidence of duty away from the manufacturer. Exemption from duty for job-worked goods was traceable to Notification No. 214/86-CE issued under Section 5A of the Central Excise Act, 1944, which operated only when its conditions were satisfied, including the undertaking by the supplier of raw materials and discharge of duty on the final products. Since the principal manufacturer did not pay duty on the final products and the notification procedure was not followed, the job worker could not claim the benefit of exemption. A manufacturer of excisable goods remains liable to duty unless validly exempted, and exemption provisions are to be strictly construed.

Conclusion: The job worker was liable to pay duty on the intermediate goods manufactured on job-work basis, and the reference was answered in favour of the Revenue.

Final Conclusion: Rule 4(5)(a) and Rule 4(6) of the Cenvat Credit Rules, 2001 do not create a standalone exemption for job workers; liability continues to rest on the manufacturer unless the conditions of the applicable exemption notification are satisfied.

Ratio Decidendi: A job worker manufacturing excisable goods is liable to duty unless exemption is expressly available under a valid notification and the notification's conditions are fulfilled; credit-removal provisions do not, by themselves, shift the duty burden.

---