Job-work brass scrap valuation cannot rest on balance-sheet figures where disclosure was made and no extra consideration flowed back.

Brass scrap cleared for job work could not be valued on the basis of higher figures reflected in balance sheets or by comparison with another manufacturer's scrap values, because the transactions were not sales, no extra consideration flowed back, and the converted goods were returned on duty-paid basis. The duty demand was therefore unsustainable on merits. The extended period of limitation also could not be invoked, as the clearances were disclosed in invoices, statutory records and RT-12 returns, the department had access through audit, and the arrangement was revenue neutral. Penalties were likewise unsustainable, and the impugned order was set aside with consequential relief.

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Issues: (i) Whether duty could be demanded on brass scrap removed for job work by adopting the higher values reflected in the balance sheets as the assessable value of the scrap, and whether the demand survived on merits. (ii) Whether the extended period of limitation and consequential penalties were invocable in the facts of the case.

Issue (i): Whether duty could be demanded on brass scrap removed for job work by adopting the higher values reflected in the balance sheets as the assessable value of the scrap, and whether the demand survived on merits.

Analysis: The valuation adopted by the department was based on notional treatment of figures appearing in the balance sheets and on comparison with scrap values of another manufacturer. The relevant transactions did not involve sale of the scrap in the market but clearance for conversion into brass rods on job work basis, with duty-paid receipt of the converted goods back into the factory. There was no evidence of any flow back of extra consideration to the assessee. In such circumstances, the higher balance-sheet figures could not be treated as the assessable value of the brass scrap cleared for job work.

Conclusion: The demand of duty was not sustainable on merits and was set aside in favour of the assessee.

Issue (ii): Whether the extended period of limitation and consequential penalties were invocable in the facts of the case.

Analysis: The records showed that the clearances were reflected in invoices, statutory records and RT-12 returns, and the department had access to the relevant material through audit. The cycle of duty-paid scrap clearance, job-work conversion, duty-paid return of brass rods, and available Cenvat credit made the transaction revenue neutral. In the absence of suppression with intent to evade duty, the extended period could not be applied and penalties could not be sustained.

Conclusion: The extended period of limitation was not invocable and the penalties were unsustainable.

Final Conclusion: The impugned order was set aside and the appeals were allowed with consequential relief.

Ratio Decidendi: Notional balance-sheet values cannot be adopted as assessable value for goods cleared for job work when the transaction is revenue neutral, there is no sale price or flow back of consideration, and the assessee has disclosed the relevant transactions in statutory records.

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