Job-work valuation excludes Modvat-covered duty on raw materials from assessable value under excise valuation principles.

In valuing goods manufactured by a job worker under Rule 6(b)(ii), the Tribunal held that the excise duty element on raw material supplied to the job worker and taken as Modvat credit is not includible in the assessable value. It found no valid distinction between captive consumption and job-work valuation, and applied the principle in Dai Ichi Karkaria to treat Modvat credit as available for set-off rather than part of material cost. On that basis, the duty element on the raw material was excluded from the valuation of inputs for Section 4(1)(b) and Rule 6(b) purposes.

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Issues: Whether, in valuing goods manufactured by a job worker under Rule 6(b)(ii) of the Valuation Rules, the excise duty element paid on raw material supplied to him and taken as Modvat credit is includible in the assessable value.

Analysis: The Tribunal held that no valid distinction exists between cases of captive consumption and cases where inputs are used by a job worker. In both situations, valuation under Rule 6(b)(ii) is required. Since Modvat credit is available to be set off against the duty paid, the duty element on the raw material does not constitute part of the material cost for valuation purposes. The principle stated in Dai Ichi Karkaria was treated as equally applicable to a job worker, and para 19 of that decision was read as excluding such credit from the value of inputs for purposes of Section 4(1)(b) and Rule 6(b).

Conclusion: The excise duty element on the raw material was not includible in the assessable value, and the appellant succeeded.

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