Independent job-worker clearances cannot be clubbed with supplier clearances to deny SSI exemption or invoke extended limitation.

Independent job-worker clearances cannot be clubbed with the raw material supplier's clearances for SSI exemption where the job workers manufacture on their own premises, operate on a principal-to-principal basis, and are not under the supplier's supervision or control. In excise law, manufacture is attributed to the entity that actually carries out the production activity, not merely the owner of the raw material. On that basis, the duty demand against the supplier was unsustainable. The extended limitation period also could not be invoked because the record did not show suppression, deception, or intent to evade duty, and penalty therefore had no legal foundation.

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Issues: (i) Whether the clearances made by job workers from their own premises could be clubbed with the appellant's clearances so as to deny Small Scale Industries exemption; (ii) whether the demand was barred by limitation and penalty could be sustained.

Issue (i): Whether the clearances made by job workers from their own premises could be clubbed with the appellant's clearances so as to deny Small Scale Industries exemption.

Analysis: The raw material was supplied by the appellant, but the manufacturing activity was carried out independently by the job workers in their own premises, without supervision or control of the appellant, and the goods were cleared from the job workers' premises. Manufacture, for excise purposes, depends on the person who actually carries out the manufacturing activity, not merely on ownership of raw material. Where the job worker is an independent entity and the relationship is on principal-to-principal basis, the job worker is the manufacturer and its clearances cannot be aggregated with those of the raw material supplier merely to deny SSI exemption.

Conclusion: The job workers' clearances could not be clubbed with the appellant's clearances, and the denial of SSI exemption was unjustified.

Issue (ii): Whether the demand was barred by limitation and penalty could be sustained.

Analysis: Once the job workers' clearances were held to be independently assessable, there was no basis to attribute duty liability to the appellant on those clearances. The show cause notice was issued beyond the normal period, and the record did not establish suppression, deception, or intent to evade duty. In the absence of such elements, the extended period could not be invoked and penalty had no foundation.

Conclusion: The demand was barred by limitation and penalty was not sustainable.

Final Conclusion: The impugned order was set aside and the appellant succeeded on the substantive duty issue as well as on limitation and penalty.

Ratio Decidendi: Where an independent job worker carries out manufacture on its own premises on a principal-to-principal basis, the resultant clearances belong to the job worker for excise purposes and cannot be clubbed with the raw material supplier's clearances to deny SSI exemption; absent suppression or intent to evade, the extended period and penalty are not available.

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