Job work duty liability falls on the actual manufacturer, not the raw material supplier, where manufacture is done by a job worker.

In a job work arrangement, central excise duty attaches to the actual manufacturer who carries out the fabrication, not to the principal supplier of raw material merely because it owns the goods. Applying the Larger Bench ratio, the appellant could not be fastened with duty where the manufacturing activity was admittedly undertaken by the job worker. As the notice was not issued to the job worker, the demand against the appellant was unsustainable, and the penalties based on that demand also failed.

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Issues: (i) Whether the principal supplier of raw material and owner of the goods could be fastened with central excise duty when the fabrication and manufacture were carried out by a job worker.

Analysis: The manufacturing activity was admittedly undertaken by the job worker on raw materials supplied by the appellant, and ownership of the goods by itself did not make the appellant the manufacturer. The ratio of the Larger Bench decision relied upon was applied to hold that, in a job work situation, duty liability attaches to the actual manufacturer and not to the principal supplier of raw material. Since the notice was not issued to the job worker, the demand could not be sustained against the appellant, and the penalties founded on that demand also failed.

Conclusion: The appellant was not liable to pay the duty, and the demand and consequential penalties were unsustainable.

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