Job Worker Liable for Excise Duty: CESTAT

The Customs, Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi, has held that the responsibility to pay excise duty rests with the job worker—the actual manufacturer—and not the principal company supplying raw materials. The bench of Binu Tamta (Judicial Member) and P.V. Subba Rao (Technical Member) has observed that The job worker independently undertook the manufacturing activity and did not carry out any manufacturing process on the goods after receiving them. The agreement between the parties clearly established a principal-to-principal relationship, not one of agency. Ownership of raw materials does not determine excise duty liability—the key factor is who undertakes the manufacturing process. The appellant/assessee, Lear Automotive had entered into an agreement with M/s Kavin Creations for manufacturing car seat sets on a job work basis. While Lear supplied the raw materials and certain tools, the manufacturing process was entirely carried out by the contractor using its own labour, machinery, and infrastructure. The finished goods were then supplied to Lear and subsequently sold to Mahindra and Mahindra Limited without any further processing. Following an audit, the Department issued a show cause notice demanding over ₹10 crore in excise duty, alleging that Lear, as the principal manufacturer, was liable to pay duty under applicable provisions and exemption notifications. An adjudicating authority partially confirmed the demand of approximately ₹4.53 crore along with interest and penalty. The central question before CESTAT was whether the principal company (Lear Automotive) could be treated as the “manufacturer” and made liable for excise duty, despite the actual manufacturing being carried out by an independent job worker. The Tribunal bench, comprising Judicial Member Binu Tamta and Technical Member P.V. Subba Rao, ruled decisively in favour of Lear Automotive. The Tribunal emphasized that under the Central Excise law, duty is levied on the act of manufacture, and the person who actually manufactures the goods is liable to pay the duty. The Department had relied on certain exemption notifications to argue that liability could shift to the principal manufacturer. However, the Tribunal clarified that such a shift is not automatic and applies only when specific conditions are fulfilled—particularly when the principal manufacturer explicitly undertakes to discharge the duty liability. The Tribunal referred to several landmark judgments, including rulings of the Supreme Court and Larger Bench decisions, which consistently held that the job worker is the manufacturer when goods are produced at their premises using their resources. Supplying raw materials or prescribing specifications does not make the principal entity the manufacturer. Duty liability cannot be transferred unless explicitly provided under law or through compliance with specific exemption notifications. The Tribunal held that lear Automotive cannot be treated as the manufacturer. The excise duty demand raised against it is unsustainable. The liability, if any, lies with the job worker. The appeal filed by Lear Automotive was allowed, and the impugned order was quashed. Case Details Case Title: M/s. Lear Automotive India Private Limited Versus Commissioner of Central GST & Central Excise Citation: JURISHOUR-637-CES-2026(DEL) Case No.: Excise Appeal No.50156 of 2024 Date: 06.04.2026 Counsel For Appellant: B.L. Narasimhan Counsel For Respondent: R.K. Mishra Click Here To Read Order Read More: CA Final Exams to Be Held Twice a Year from May 2026

Job Worker Liable for Excise Duty: CESTAT

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