Job-work exemption and intermediate goods liability clarified where inputs move without Modvat credit and final products are exempt.

The article examines excise duty exposure on intermediate goods processed by job workers where inputs were sent without availing Modvat credit and the final products were exempt. It discusses Notification No. 214/86-C.E. and distinguishes Rule 57F of the Central Excise Rules, 1944 on the basis that the cited precedent concerned movement of duty-credit inputs, not exempt final products without input credit. The stated legal point is that, on these facts, the job-work exemption is inapplicable, yet the principal manufacturer is not treated as liable to pay duty on the processed intermediate goods merely because they are otherwise excisable.

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Issues: Whether duty could be demanded from the manufacturer on intermediate goods processed by job workers when the inputs were sent without taking Modvat credit and the final products were exempt from duty.

Analysis: The dispute turned on the scope of the job-work exemption under Notification No. 214/86-C.E. and the treatment of goods sent for further processing. The cited decision on Rule 57F of the Central Excise Rules, 1944 was distinguished because that case involved movement of duty-credit inputs, whereas the present appeals concerned goods processed for exempt final products without availment of input credit. The applicable notification was held inapplicable on the facts, and the manufacturer was therefore not treated as responsible for payment of duty on the processed intermediate materials, even if they were otherwise excisable.

Conclusion: The duty demand on the appellant was unsustainable and the appeals succeeded.

Ratio Decidendi: Where goods are sent to job workers without availing input credit and the job-work exemption is inapplicable because the final products are exempt, the principal manufacturer is not liable to pay duty on the intermediate goods processed by the job workers.

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