Job-work clearance of semi-finished goods does not attract excise duty until the final product is completed by the principal manufacturer.

Job work that covers only part of the manufacturing process does not create a finished excisable product when the principal manufacturer completes production at its own factory. Goods cleared from the intermediate unit in such circumstances remain semi-finished goods, so excise duty is not recoverable from the job worker at that stage. The operative test is whether the activity has brought into existence a new commodity capable of being treated as the final marketable product; if not, duty does not attach on clearance from the job-work unit.

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Issues: Whether the balloons cleared by the assessee on job-work basis were excisable finished goods liable to duty, or only semi-finished goods not attracting duty at that stage.

Analysis: The arrangement showed that the assessee had undertaken only part of the work, while the final manufacture of the balloons was to be completed by the principal manufacturer at its own factory. The activity performed by the assessee did not result in a new commodity coming into existence, and the goods cleared from the assessee's premises were not the finished goods but only semi-finished goods. On that footing, the premise that duty was recoverable from the assessee was not accepted.

Conclusion: The goods were not liable to excise duty at the stage of clearance from the assessee, and the Revenue's appeal was rejected.

Ratio Decidendi: Where job work undertaken by an intermediate unit does not bring into existence a final excisable product and only semi-finished goods are cleared for completion by the principal manufacturer, duty is not recoverable from the job worker at that stage.

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