Valuation of converted yarn must follow binding Board circular; demand based on an inconsistent profit-addition method was unsustainable.

Valuation of hank yarn converted into yarn on cones had to follow the Board's circular, which bound Revenue officers. The assessee valued the goods by taking the cost of hank yarn, conversion cost and profit reflected in the balance sheet, while the Revenue added a 10% profit margin to the cost basis. Because the demand was raised on a valuation method contrary to the approved circular, the duty demand could not be sustained. The stated position is that the Revenue must apply the circular-prescribed method when computing value for such converted yarn.

---

---

Issues: Whether the duty demand on yarn converted from hank yarn into yarn on cones could be sustained when the valuation method adopted by the Revenue was contrary to the Board's circular.

Analysis: The dispute concerned the proper computation of the value of hank yarn converted into yarn on cones. The assessee adopted a valuation based on the aggregate of the cost of hank yarn, the cost of conversion, and profit reflected from the balance sheet. The Revenue instead added a 10% profit margin to the value of hank yarn plus conversion cost. The method claimed by the assessee was in accordance with the Board's circular, and such circulars are binding on the officers of the Revenue. Since the demand had been raised by following a method contrary to the approved circular, it could not be sustained.

Conclusion: The valuation method adopted by the Revenue was impermissible and the demand was not sustainable.

---