Excise valuation of job-worked paper reels turns on factory-clearance price, not later sheet sale price after conversion.

Excise valuation of paper reels sent for job-work depended on the condition of the goods at the time and place of factory removal. The majority treated the assessable value as the normal price of reels when cleared from the factory, not the higher price of sheets obtained only after conversion and later sale. The fact that the reels were ultimately marketed as sheets did not alter the valuation basis for the goods removed from the factory. The analysis therefore supports valuation by reference to the factory-clearance price of reels. A dissenting view considered the goods to remain assessable as reels despite later conversion.

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Issues: Whether the assessable value of paper reels sent to job workers for conversion into sheets was to be determined on the basis of the price applicable to reels at the time of removal from the factory or on the basis of the higher price applicable to sheets when ultimately sold to customers.

Analysis: The majority held that excise valuation turns on the condition of the goods at the time and place of removal, and not on the form in which they are later sold. Since the reels were cleared from the factory as reels and were only thereafter converted into sheets through job work, the relevant normal price was the factory price of reels. The fact that the final sale to customers took place in the form of sheets did not justify adopting the sheet price for valuation of the reels removed from the factory. The majority therefore treated the assessment as governed by the price applicable to reels at removal.

Conclusion: The issue was decided in favour of the assessee, and the valuation had to be based on the price of reels at the time of factory clearance.

Dissenting Opinion: G.A. Brahma Deva, Member (J), held that the goods were actually sold as sheets after conversion and that the reels sent to job workers should still be valued as reels because duty must be assessed on the condition in which the goods leave the factory. On that view, the appeal deserved to be allowed.

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