Excise valuation in job-work manufacturing follows intrinsic value at manufacture, not the brand owner's resale price.

In a principal-to-principal job-work arrangement, the person undertaking manufacture was treated as the manufacturer for excise purposes, even though the brand owner supplied materials and supervised quality control. Mere supply of inputs and supervision did not convert the arrangement into one of principal and agent. The assessable value of biscuits had to be taken at the stage of manufacture on an intrinsic value basis, comprising raw-material cost, conversion or processing charges, and manufacturing profit, rather than the brand owner's wholesale selling price. The settled principle applied was that excise valuation must reflect the value of the goods when manufactured, not their later resale value.

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Issues: Whether the appellant was the manufacturer for excise purposes and, if so, whether the assessable value of biscuits manufactured on job-work basis for the brand owner was to be determined on the basis of the brand owner's wholesale selling price or on the intrinsic value of the goods comprising raw-material cost, conversion charges, and manufacturing profit.

Analysis: The arrangement showed that the appellant manufactured the biscuits, while the brand owner supplied materials and exercised supervision for quality control. Mere supervision and supply of inputs did not by themselves convert the transaction into one of principal and agent so as to treat the brand owner as the manufacturer. Excise duty attaches to manufacture, and the relevant valuation in a genuine job-work situation is the value of the goods at the stage of manufacture, not the subsequent resale price of the brand owner. The settled principle applied in the authorities relied upon was that assessable value must reflect the cost of raw materials, the cost of conversion or processing, and the manufacturer's profit, and not the brand owner's wholesale market price.

Conclusion: The appellant was the manufacturer, and the assessable value had to be determined on the intrinsic value basis of raw materials plus job-work charges and profit, not on the wholesale price at which the brand owner sold the goods.

Ratio Decidendi: In a principal-to-principal job-work arrangement, excise valuation must be based on the intrinsic value of the manufactured goods at the point of manufacture, comprising material cost, processing charges, and manufacturing profit, and not on the subsequent resale price of the brand owner.

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