regarding excise

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C.A. LINESH PATIL (Querist)
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27 July 2010 i have several query regarding excise:-

1).who is liable to pay excise duty if goods is manufactured by job worker.in the following cases:-

a)when there is principal to principal relationship AND

b)when there is principal to agent relationship.

2)what is meant by principal to principal & principal to agent relationship.

3)when packing,repacking, labeling,& relabeling amounts to deemed manufacture

please reply my queries as soon as possible and dont copy paste section wordings.
i want explanation in simple and own word.

Thanks in advance

ADITYA

ADITYA (Expert)
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28 July 2010 Excise Duty is attracted once good is manufactured. If principal (what ever capacity - Relation) send Raw Material for Final Goods to be manufactured after observing due Excise Procedure, the Duty Liability is on the principal other wise Job Worker Factory will be liable for Excise Duty Payment

C.A. LINESH PATIL

C.A. LINESH PATIL (Querist)
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28 July 2010 i have several query regarding excise:-

1).who is liable to pay excise duty if goods is manufactured by job worker.in the following cases:-

a)when there is principal to principal relationship AND

b)when there is principal to agent relationship.

2)what is meant by principal to principal & principal to agent relationship.

3)when packing,repacking, labeling,& relabeling amounts to deemed manufacture

please reply my queries as soon as possible and dont copy paste section wordings.
i want explanation in simple and own word.

Thanks in advance

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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20 July 2025 Sure! Here’s a simple explanation of your excise queries:

1) Who is liable to pay excise duty when goods are manufactured by a job worker?
a) Principal to Principal relationship:
Here, the job worker and the principal are separate manufacturers. The job worker manufactures the goods on behalf of the principal, but the ownership of raw materials stays with the principal. In this case, the principal (owner of the raw materials) is liable to pay excise duty, because the principal is considered the manufacturer for excise purposes.
b) Principal to Agent relationship:
In this relationship, the job worker acts as an agent of the principal, i.e., the job worker doesn’t have any ownership or rights on the goods. The job worker just carries out manufacturing activities on behalf of the principal. Here also, the principal is liable to pay excise duty because the principal owns the goods and controls the process.
2) What is meant by Principal to Principal and Principal to Agent relationship?
Principal to Principal:
Both parties (principal and job worker) are independent manufacturers. The job worker has its own inputs and makes goods for the principal, but legally they are separate entities responsible for their own manufacturing activities.
Principal to Agent:
The job worker acts only on behalf of the principal (like a representative or contractor). The job worker has no ownership of the materials or finished goods. The principal retains ownership and control.
3) When does packing, repacking, labeling, and relabeling amount to deemed manufacture?
If the activities of packing, repacking, labeling, or relabeling cause a change in the nature, character, or use of the product, then it is considered “deemed manufacture.” This means that such activities are treated as manufacturing for excise duty purposes.
If these activities are just cosmetic or for convenience without changing the core product, then it is generally not treated as manufacture.
Example:

Changing the product from a bulk raw form to a retail packaged form could be deemed manufacture because it changes the product's use and marketability.
Simply putting a new label for branding, without altering the product, usually isn’t deemed manufacture.

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