The Delhi Bench of Customs, Excise, and Service Tax Appellate Tribunal ( CESTAT ) ruled that if a principal manufacturer fails to discharge the excise duty liability, the burden shifts to the job worker.
Tamra Dhatu Udyog Pvt. Ltd.,appellant-assessee,had undertaken the manufacturing of copper wires on a job work basis for M/s. Neelgiri Electricals, which provided the raw copper rods. The assessee sought to claim an exemption from central excise duty under Notification No. 214/86-CE, which allows job workers to avoid duty payments if specific conditions are met.
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However, M/s. Neelgiri Electricals was also benefiting from area-based duty exemptions under other notifications and was clearing their final products without paying excise duty. This discrepancy led the authorities to question the validity of the assessee’s claimed exemption and issue a show cause notice, demanding unpaid excise duty along with interest and penalties.
The main point of contention in the appeal was whether the assessee, as a job worker, could still benefit from the duty exemption when Neelgiri, the principal manufacturer, was not paying duty on its final products due to other exemptions. For the exemption to apply under Notification No. 214/86-CE, the principal manufacturer, Neelgiri, was required to submit an undertaking that goods produced on job work would ultimately be cleared on payment of duty.
Since Neelgiri did not provide this commitment and continued to operate under the area-based exemption, the tribunal held that the job work exemption could not be extended to the assessee.
Citing prior cases, the tribunal reinforced that if the principal manufacturer does not take on the excise duty liability, the responsibility falls to the job worker. In this instance, the assessee had continued production despite knowing that Neelgiri was not fulfilling the necessary conditions to pass on the exemption. Statements from the assessee’s representative indicated an awareness of Neelgiri’s exemption status, further affirming the appellant’s responsibility to ensure compliance.
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The two member bench comprising Binu Tamta ( Judicial Member ) and P.V.Subba Rao ( Technical Member ) upheld the lower authorities’ decision, confirming that the assessee was liable for the excise duty, along with applicable interest and penalties.
The appeal was dismissed, solidifying the ruling that a job worker cannot claim exemption if the principal manufacturer does not meet the specific conditions required to transfer this benefit.
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