Job-work exemption cannot be denied to a worker merely because the raw-material supplier failed to file the prescribed undertaking.

Under the job-work exemption scheme, the procedural undertaking was required from the supplier of raw materials, not the job worker. Non-furnishing of that undertaking by the supplier could not, by itself, be used to deny the exemption or fasten central excise duty, interest, or penalty on the job worker when the goods were processed and returned within the job-work chain. Prior rulings were distinguished because they involved demands on the principal manufacturer rather than the job worker. On that basis, the demand, interest, and penalty were held unsustainable against the job worker.

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Issues: Whether the demand of central excise duty, interest, and penalty could be sustained against the job worker when the exemption notifications governing job work required an undertaking from the supplier of raw materials and the supplier's omission was treated as the basis for denial of exemption.

Analysis: The notifications governing job work made the exemption conditional upon the supplier of the raw materials or semi-finished goods furnishing the prescribed undertaking to the jurisdictional officer. The dispute turned on whether non-compliance with that procedural requirement by the supplier could be visited on the job worker. The Tribunal held that the condition was directed at the supplier and that the job worker could not be made liable merely because the supplier failed to complete the prescribed formality. The prior decisions relied upon for denial were distinguished on the footing that, in those cases, the demand was raised on the principal manufacturer and not on the job worker. The Tribunal also accepted that the goods were processed and returned in the job-work chain, and that the job worker could not be denied the benefit solely because the supplier did not file the undertaking.

Conclusion: The demand, interest, and penalty were unsustainable against the job worker, and the appeal succeeded.

Ratio Decidendi: Where a job-work exemption places the procedural obligation on the supplier of raw materials, the job worker cannot be denied the benefit or fastened with duty liability merely because the supplier failed to furnish the required undertaking, especially when the transaction is otherwise within the job-work scheme.

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