Job worker duty liability under Notification 214/86 fails where supplier undertakes duty payment and no shortage is proved.

Where raw material is received by a job worker under Notification No. 214/86 on the supplier's undertaking to discharge duty on the finished goods, the job worker is not treated as the manufacturer for central excise duty purposes and the duty liability remains with the supplier. On the facts noted, there was also no evidence that the supplier denied receipt of the processed goods. The alleged shortage of finished goods was not established because the panchnama showed nil RG-I balance matching physical verification. The view that a job worker is always the manufacturer was held inapplicable on these facts, and the duty demand and penalty could not be sustained.

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Issues: Whether a job worker receiving raw material under Notification No. 214/86 read with Rule 57AC could be fastened with central excise duty and penalty, and whether shortage of finished goods was established on the record.

Analysis: The raw material was received under Notification No. 214/86 on the basis of an undertaking by the supplier that duty on the finished goods would be discharged by it after receipt from the job worker. In that situation, the job worker could not be treated as the manufacturer for payment of excise duty, and the duty liability remained with the supplier. There was also no material to show that the supplier had denied receipt of the finished goods after job work. On the question of shortage, the panchnama showed that the RG-I balance was nil and tallied with physical verification, so no tangible evidence of shortage was available. The cited principle that a job worker is always to be treated as manufacturer was held inapplicable on these facts.

Conclusion: The duty demand and penalty could not be sustained against the assessee.

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