Job-work valuation excludes trader's post-manufacture profit; related-person status does not change assessable value.

Valuation of goods processed on job work basis must follow the Ujagar Prints principle: assessable value is confined to the cost of raw materials supplied by the trader plus the job worker's processing charges, expenses, and profit. The trader's later wholesale price, or any post-manufacture profit and expenses, cannot be loaded into assessable value merely because the job worker and trader are related persons. On that basis, the differential duty demand lacked legal foundation, and the consequential penalties and confiscation were unsustainable.

---

---

Issues: Whether the assessable value of goods processed on job work basis had to include the wholesale price at which the trader later sold the goods merely because the job worker and the trader were treated as related persons, and whether the demand, penalties, and confiscation based on that valuation could stand.

Analysis: The demand was founded on the premise that the job worker and the trader were related persons, but the governing rule for valuation of job-worked goods was the principle laid down in Ujagar Prints and followed in later decisions. Under that principle, the assessable value consists of the cost of raw materials supplied by the trader together with the job worker's processing charges, expenses, and profit. The subsequent profit or expenses of the trader after manufacture cannot be added to the assessable value. The relationship between the parties does not alter this principle. Since the duty in both streams of clearances had been paid on the correct job-work valuation basis, there was no legal foundation for the differential duty demands.

Conclusion: The demand of differential duty was unsustainable. The valuation adopted by the assessee was correct, and the consequential penalties and confiscation could not be sustained.

---