Job-work valuation excludes product development and consultancy charges not linked to conversion cost or assessable value

Product development charges and consultancy charges collected by a job worker from the principal manufacturer were not includible in the assessable value of job-worked medicaments under the Ujagar Prints formula. The assessable value had already been determined on the basis of raw material cost, conversion cost and profit, and the disputed amounts were not shown to relate to the job work or to conversion of raw materials into finished goods. The product development charges were also debited in a composite manner across multiple medicaments, and service tax had been paid on those charges, supporting exclusion from Central Excise valuation. The Revenue's challenge therefore failed.

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Issues: Whether product development charges and consultancy charges collected by the job worker from the principal manufacturer were liable to be included in the assessable value of the job-worked medicaments cleared under the Ujagar Prints formula.

Analysis: The assessable value had already been worked out on the basis of cost of raw materials plus cost of conversion and profit. The disputed amounts were not shown to be attributable to the job work itself or to the conversion of raw materials into finished goods. The product development charges were debited in a composite manner without amortisation, even though the debit note covered numerous medicaments and only some of them were actually manufactured and supplied. The fact that service tax had also been paid on the product development charges reinforced the view that the same amounts could not again be brought to Central Excise duty as part of conversion charges.

Conclusion: The disputed charges were not includible in the assessable value of the job-worked goods, and the Revenue's appeal failed.

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