Job-work valuation must follow Ujagar Prints cost-plus method when Rule 8 and Rule 10A do not apply.

Rule 10A applies to job-worked goods sold by the principal manufacturer, and Rule 8 applies only where excisable goods are used for consumption by the assessee or on its behalf in producing other articles. Where job-worked goods are not captively consumed by the job worker and the principal manufacturer does not sell them but uses them in packing its products, neither Rule 10A nor Rule 8 governs valuation. In that situation, Rule 11 read with Section 4 of the Central Excise Act, 1944, and the Ujagar Prints principle apply, so assessable value is based on the cost of raw materials plus processing or job charges. The demand founded on Rule 8 was held unsustainable.

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Issues: Whether, in respect of job-worked goods manufactured from raw materials supplied by the principal manufacturer and not sold by the principal manufacturer, the assessable value is to be determined under Rule 10A or Rule 8 of the Central Excise Valuation Rules, 2000, or on the basis of cost of raw materials plus job charges under the Ujagar Prints formula.

Analysis: Rule 10A applies where the job-worked goods are sold by the principal manufacturer or are transferred for sale from another place after clearance from the job-worker. Rule 8 applies only where excisable goods are not sold by the assessee but are used for consumption by him or on his behalf in the production or manufacture of other articles. In the present case, the job worker did not captively consume the goods and the principal manufacturer did not sell them but used them in packing of its products. In such a situation, Rule 10A(i) and (ii) and Rule 8 are inapplicable. The appropriate method is Rule 11, read with Section 4 of the Central Excise Act, 1944, applying the settled principle in Ujagar Prints that valuation should be based on cost of raw materials plus processing or job charges.

Conclusion: The demand based on Rule 8 was not sustainable and the assessable value had to be computed on cost of raw materials plus job charges. The appeal was allowed in favour of the assessee.

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