Job-work exemption applies to manufacturing activity on customer-supplied materials, not just mere processing units.

Notification No. 119/75 was construed to cover goods manufactured in a factory on a job-work basis where the job worker carries out a manufacturing process on customer-supplied materials and returns the finished article. The explanation to the notification was read as extending beyond mere processing units, and the exemption was linked to the value added by the job work. A departmental view treating the notification as confined only to units doing simple processing was held inconsistent with its terms, so the contrary demand could not stand.

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Issues: Whether Notification No. 119/75 applied to a factory carrying out manufacturing on job-work basis, or whether it was confined only to a unit doing mere processing work.

Analysis: The notification exempted goods manufactured in a factory as job work, and its explanation defined job work as work where an article intended to undergo a manufacturing process is supplied to the job worker and returned after that process. The language of the notification therefore covered a unit that undertook manufacturing activity on customer-supplied raw material, not merely a processing unit that left the article substantially unchanged. The earlier view adopted by the departmental authority was inconsistent with the terms of the notification and the exemption was to be applied on the value added by the job work.

Conclusion: The notification applied to the petitioner's manufacturing activity on job-work basis, and the demand based on the contrary view was unsustainable.

Ratio Decidendi: An exemption notification for goods manufactured in a factory as job work applies where the job worker carries out a manufacturing process on materials supplied by the customer and returns the manufactured article, and it is not confined to mere processing units.

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