Whether the supplier of the raw materials or the Job workers would be the actual manufacturer for purposes of exemption under Notification No.175/86 dated 1-3-1986 - Central Excise - 49/90-CX.8

Whether the supplier of the raw materials or the Job workers would be the actual manufacturer for purposes of exemption under Notification No.175/86 dated 1-3-1986 Circular No. 49/90-CX.8 Dated 23-7-1990 [From F. No. 267/144/89-CX.8] Government of India Central Board of Excise Customs New Delhi Subject : Whether the supplier of the raw materials or the Job workers would be the actual manufacturer for purposes of exemption under Notification No.175/86 dated 1-3-1986 . Attention is invited to the instructions issued vide Board's F. No. 267/31/88-CX.8, dated 20-9-88 clarifying that, if the goods manufactured on job charge basis are covered by the relationship as contemplated by Notification No. 305/77, dated 5-11-77 then the same would be treated as, goods manufactured by the supplier of the raw materials (i.e. Principal Manufacturer) and the eligibility of levy of duty on such goods should be decided accordingly. On requests for re-examination of the instructions aforesaid, the issue was discussed in a full Board meeting and it was decided by the Board that the instructions were issued in consultation with the Law Ministry and were in conformity with the Supreme Court judgment in the case of Bajrang Gopilal Gajavi, 1986 (25) E.L.T. 609 (S.C.) and therefore required no change. Request have subsequently been received from the trade for modifying the above instructions of the Board on the ground that Supreme Court vide its order, dated 12-3-1990 [1990 (47) E.L.T. A 161] has recently upheld the CEGAT decision in case of Collector of Central Excise v. Kerala State Electricity Board 1990 (47) E.L.T. A161, which has relied upon the ratio held in CEGAT decision in Multi Trade Overseas Corporation - 1987 (30) E.L.T. 980 wherein, it has been held that the supplier of the raw material will not become the manufacturer by the mere fact that the raw materials being supplied by him and the same were to be utilised in the manufacture of articles to the specification of the supplier and that the manufactured articles were to be returned to the supplier. The matter has been re-examined in a full Board meeting. It was observed by the Board that the aforesaid judgments related to the specific facts of the cases mentioned therein. It was therefore, decided by the Board that every case has to be looked into keeping in view the circumstances and merits of the case and also keeping in view the spirit of aforesaid judgment of Hon'ble Supreme Court. However, to remove ambiguity in the instructions aforesaid, Board has decided to clarify the position to the field formations as under :- "If the relationship between the raw material supplier and the job worker is one of principal to principal, then the job worker will be the actual manufacturer. If from the facts of the case and the terms of agreement between the raw material supplier and job worker, it can be established that job worker is a dummy unit or is just a hired labour of the raw material supplier, then the raw material supplier would be his workman or hired labour". Instructions issued vide F. No. 267/31/88-CX.8, dated 20-9-88 stand modified to the above effect. Treade Field formations may be informed suitably.