Job-work valuation excludes trader resale profit; misdeclaration based on supplier data cannot justify extended limitation or penalty.

In job-work valuation of processed fabrics, assessable value must be determined at the manufacture stage, and the trader's later resale price or downstream profit cannot be added. On that basis, a differential duty demand based on trader-supplied resale data was treated as unsustainable because it rested on unsafe assumptions. The commentary also notes that where the alleged incorrect declaration came from trader-furnished data rather than deliberate suppression by the manufacturer, extended limitation cannot be applied and penalty cannot survive. The resulting position is that duty confirmation and penalty fail where the valuation basis and suppression allegations are not properly established.

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Issues: (i) Whether the differential duty demand could be sustained when the job worker valued the grey fabrics on the basis of trader-supplied data and the traders' resale price was excluded from assessable value. (ii) Whether the extended period of limitation and penalty could be invoked against the appellants on the allegation of misdeclaration and suppression.

Issue (i): Whether the differential duty demand could be sustained when the job worker valued the grey fabrics on the basis of trader-supplied data and the traders' resale price was excluded from assessable value.

Analysis: The valuation of processed fabrics cleared by the job worker had to proceed on the basis of the manufacture stage and not on the traders' later market sale price. The job worker was the manufacturer for excise purposes, but the material supplied to him was accompanied by declarations furnished by the traders. The reasoning accepted that the traders' profit on subsequent sale of the processed goods could not be added to the assessable value. It was also noticed that the conclusions reached in the demand order rested on assumptions which were not a safe basis for computing differential duty.

Conclusion: The demand for differential duty was not sustainable.

Issue (ii): Whether the extended period of limitation and penalty could be invoked against the appellants on the allegation of misdeclaration and suppression.

Analysis: The alleged wrong declaration originated from the traders' data and not from any deliberate suppression by the appellants. In that situation, the extended limitation under the excise law could not be applied against the job worker. Once the charge of deliberate suppression or fraud failed, the foundation for penalty also disappeared. The reasoning further accepted that the provisions relied upon for penalty were not sufficient on the facts found.

Conclusion: The extended period of limitation and the penalty were not sustainable against the appellants.

Final Conclusion: The order confirming duty and imposing penalty could not stand, and the appellants were entitled to the reliefs flowing from the setting aside of those findings.

Ratio Decidendi: For excise valuation in job-work processing, the assessable value cannot include the trader's downstream sale profit, and where misdeclaration is attributable to trader-supplied data rather than deliberate suppression by the manufacturer, the extended limitation and penalty provisions cannot be invoked against the manufacturer.

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