Manufacturing liability under central excise turns on who is the real manufacturer; job-work defence fails without prescribed procedure.

Liability to central excise duty attached to the person who was legally and factually the manufacturer of excisable goods cleared under a brand name. The claim to be only a job-worker failed because the principal concern had not assumed the duty burden and the prescribed procedure for transfer of materials and job-work was not shown to have been followed; the asserted lack of premises, raw materials, or direct control did not displace manufacturing liability. On penalty, the record did not show material supporting contumacious conduct or any valid basis to sustain penalty on the proprietor of the principal concern, so that penalty was set aside.

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Issues: (i) whether the appellant was the manufacturer liable to pay central excise duty on the goods cleared under the brand name; (ii) whether the penalty imposed on the proprietor of the principal concern was sustainable.

Issue (i): whether the appellant was the manufacturer liable to pay central excise duty on the goods cleared under the brand name.

Analysis: The goods were admittedly excisable, and exemption under Notification No. 8/2003-CE was unavailable on the facts found. The claimed status of job-worker could operate only where the principal concern had assumed the duty liability and the prescribed procedure for transfer of materials and job-work had been followed. No such assumption of responsibility was shown, and the transfer of materials was not established to have been in accordance with the prescribed procedure. The asserted absence of premises, raw materials, or direct control did not displace the liability of the person found to have manufactured the goods.

Conclusion: The appellant was correctly treated as the manufacturer liable to duty, and this issue is decided against the assessee.

Issue (ii): whether the penalty imposed on the proprietor of the principal concern was sustainable.

Analysis: Once the manufacturing liability was fastened on the appellant, the proprietor of the principal concern could not be visited with penalty on the same footing. The record did not show material warranting an inference of contumacious conduct or other circumstances justifying penalty against him.

Conclusion: The penalty on the proprietor was unsustainable and is set aside, which is in favour of the assessee.

Final Conclusion: The duty demand against the manufacturing appellant stands, but the penalty on the proprietor does not survive.

Ratio Decidendi: Liability to central excise duty rests on the person who is legally and factually the manufacturer, and a job-worker can avoid that liability only where the principal assumes duty responsibility and the prescribed job-work procedure is duly complied with; penalty cannot be sustained without a valid factual and legal basis.

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