Ujagar Prints valuation excludes unrelated consultancy and product development charges from job-work assessable value.

For job-work valuation under the Ujagar Prints formula, assessable value is limited to raw material cost plus conversion cost and profit. Product development and consultancy charges were excluded because the Department did not show they were attributable to the actual conversion of raw materials into finished medicaments. The product development debit note also covered multiple medicaments, while only some were manufactured and cleared, and the amount was not amortised. Payment of service tax on the product development charges further supported exclusion from central excise value. The differential duty demand was therefore unsustainable.

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Issues: Whether product development charges and consultancy charges raised by the job worker on the principal manufacturer were includible in the assessable value of job-worked medicaments cleared under the Ujagar Prints formula.

Analysis: The assessable value of the job-worked goods had been determined on the basis of the accepted Ujagar Prints formula, namely cost of raw materials plus cost of conversion including profit. The Department did not establish that any essential element of valuation had been omitted. The disputed charges were not shown to be attributable to the actual job work of converting raw materials into finished medicaments. The product development debit note also covered amounts relatable to several medicaments, while only some of them were actually manufactured and cleared, and the amount had not been amortised. The fact that service tax was being paid on product development charges further supported the view that the same charges could not again be treated as part of central excise assessable value.

Conclusion: The disputed consultancy and product development charges were not includible in the assessable value of the job-worked medicaments, and the demand of differential duty was unsustainable.

Ratio Decidendi: For job-work valuation under the Ujagar Prints principle, only those expenses attributable to the conversion of raw materials into finished goods can be included in assessable value; charges unrelated to the job work or not properly amortised cannot be added.

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