Job-work valuation must follow material cost plus processing charges, and short-levy action lies against the manufacturer.

In a job-work arrangement, duty liability remained with the job worker as the manufacturer, so assessable value had to be determined on the basis of material cost plus processing charges rather than cost construction with an added 15% profit. Payment of duty by the principal on behalf of the job worker did not change the valuation method. Any short-levy allegation had to be directed against the job worker, and a notice issued to the principal alone was not sustainable. The department's valuation basis was therefore rejected.

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Issues: Whether, in a job-work arrangement, the assessable value of the goods was required to be determined on the basis of cost construction by adding 15% profit, or on the basis of material cost plus processing charges, and whether a short-levy notice could be issued to the principal who paid the duty instead of the job worker.

Analysis: The liability to pay duty was that of the job worker as the manufacturer of the goods. In such circumstances, valuation had to be made on the basis of the material cost plus processing charges. The fact that the principal paid duty on behalf of the job worker did not alter the method of valuation. Any allegation of short levy, if at all, was required to be raised against the job worker, and no such notice had been issued to the manufacturer.

Conclusion: The department's valuation basis was rejected, and the appeal was not sustainable.

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