Job-work valuation excludes merchant-manufacturer profit, and extended limitation requires proof of deliberate suppression to evade duty.

Job-work valuation must be confined to the cost of raw materials plus job charges, including the job-worker's profit, and must exclude the merchant-manufacturer's selling price, profit margin and related expenses. Where valuation is attempted on a comparable-price or cost-construction basis, the relevant cost elements must be properly examined and the comparison must relate to the correct goods. The extended period of limitation for suppression applies only on proof of deliberate withholding of material facts with intent to evade duty; a mere omission or incomplete discussion is insufficient when records are available and the matter was earlier examined.

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Issues: (i) Whether the assessable value of job-work goods cleared from the assessee's factory could include the merchant-manufacturer's selling price or had to be confined to the cost of raw materials plus job charges including job-worker's profit. (ii) Whether the valuation adopted for the remaining clearances on the basis of comparable price or cost construction was sustainable and whether the demand and penalty were liable to be sustained without proper examination of the cost elements. (iii) Whether the extended period of limitation could be invoked on the ground of suppression of facts.

Issue (i): Whether the assessable value of job-work goods cleared from the assessee's factory could include the merchant-manufacturer's selling price or had to be confined to the cost of raw materials plus job charges including job-worker's profit.

Analysis: In the case of job-work clearances sold by merchant-manufacturers from the assessee's factory premises, the merchant-manufacturer's price would include his own profit margin and expenses. Such elements are not part of the assessable value of the job-work goods. The proper valuation is the cost of raw materials supplied plus job charges including job-worker's profit.

Conclusion: The demand based on the merchant-manufacturer's selling price was not sustainable and was set aside in favour of the assessee.

Issue (ii): Whether the valuation adopted for the remaining clearances on the basis of comparable price or cost construction was sustainable and whether the demand and penalty were liable to be sustained without proper examination of the cost elements.

Analysis: For the component valued on comparable price, the relevant freight and octroi elements in the raw material cost were not properly examined, and there was no finding on cutting waste or the identity of the goods relied upon for comparison. For the rods cleared on job work basis, the order did not explain why cost construction was adopted despite the settled principle that job-work valuation is to be based on raw material cost plus job charges including profit. The matter required fresh determination after applying the correct valuation principles.

Conclusion: The demands of Rs. 66,237/- and Rs. 65,092/- and the related penalty were set aside and remanded for de novo adjudication in favour of the assessee.

Issue (iii): Whether the extended period of limitation could be invoked on the ground of suppression of facts.

Analysis: Suppression for the purpose of the extended limitation period requires a deliberate withholding of material facts with intent to evade duty. Mere omission or non-discussion of a matter, especially where relevant returns and records were available and the authorities had earlier examined the unit, is not enough unless supported by positive evidence of intent to evade.

Conclusion: The finding invoking suppression was not properly supported and the issue was directed to be reconsidered on remand in favour of the assessee.

Final Conclusion: The appeal succeeded in part. One demand was set aside outright, while the remaining demands and the penalty were remitted for fresh decision after applying the correct valuation principles and properly examining limitation.

Ratio Decidendi: In job-work valuation, assessable value is confined to the cost of raw materials plus job charges and the worker's profit, excluding the merchant-manufacturer's profit and expenses; the extended period of limitation can be invoked only on proof of deliberate suppression with intent to evade duty.

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