Job-work valuation must follow Ujagar Prints, and Rule 8 cannot be used absent captive consumption or non-arm's-length dealing.

Rule 8 of the Central Excise Valuation Rules, 2000 applies only to captive consumption by the assessee and could not be used to revalue yarn manufactured on job-work from third-party supplied raw materials. The appropriate valuation principle for such job-work clearances remained the Ujagar Prints method, as reflected in CBEC Circular No. 619/10/2002-CX, unless the Revenue showed that the dealings were not at arm's length. No such evidence was established, so inclusion of the raw material supplier's profit margin was unsustainable and the assessee's valuation method was accepted.

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Issues: Whether duty on job-work manufactured yarn could be valued by invoking Rule 8 of the Central Excise Valuation Rules, 2000, and whether the assessable value could include the raw material supplier's profit margin on the footing that the transaction was not at arm's length.

Analysis: The goods were manufactured only on job-work basis from raw materials supplied by third parties. Rule 8 applies to captive consumption by the assessee itself, and therefore it could not be used to revalue the goods in a job-work situation. The valuation of job-work goods was governed by the principle laid down in Ujagar Prints, which continued to apply under the revised valuation regime, as also reflected in CBEC Circular No. 619/10/2002-CX. dated 19-2-2002. There was no evidence that the dealings between the job worker and the raw material suppliers were not on an arm's length basis.

Conclusion: Rule 8 could not be invoked, and the demand based on adding the supplier's profit margin was unsustainable. The valuation adopted by the assessee was accepted.

Final Conclusion: The assessee's valuation method for job-work clearances was upheld and the Revenue's contrary demand failed.

Ratio Decidendi: Rule 8 of the Central Excise Valuation Rules, 2000 applies only to captive consumption by the assessee, and job-work clearances must be valued in accordance with the settled Ujagar Prints principle unless a lack of arm's length dealing is shown.

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