Job-work valuation on substituted raw material follows cost-plus-job-charges basis, with extended limitation for non-disclosure.

In a job-work arrangement under Notification No. 214/86-C.E. and Rule 57F(4), externally procured copper wire bars used in place of the principal manufacturer's material were treated as substituting that material for assessment purposes, and the resulting rectangular copper bars were held assessable on the Ujagar Prints basis of cost of raw material plus job charges. Because credit had been taken on the bought-out raw material and the substitution was not disclosed to the department, the extended period of limitation and penalty were also treated as properly invocable.

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Issues: (i) Whether rectangular copper bars manufactured out of copper wire bars procured from outside, in the course of job work undertaken under Notification No. 214/86-C.E. and Rule 57F(4) of the Central Excise Rules, 1944, were liable to duty on the basis of cost of raw material plus job charges; (ii) Whether the extended period of limitation and penalty were invocable in the facts of the case.

Issue (i): Whether rectangular copper bars manufactured out of copper wire bars procured from outside, in the course of job work undertaken under Notification No. 214/86-C.E. and Rule 57F(4) of the Central Excise Rules, 1944, were liable to duty on the basis of cost of raw material plus job charges.

Analysis: The processed material supplied by the principal manufacturer was to be returned substantially in finished form, and the waste generated in excess of the permitted burning loss was treated as replaceable by the appellant through procurement of equivalent raw material from outside. That externally procured raw material was held to stand in the place of the principal manufacturer's material for purposes of the job-work arrangement. Since credit had been availed on the bought-out raw material, the resulting rectangular bars were treated as dutiable clearances. The assessable value was held to be governed by the principle in Ujagar Prints, namely cost of raw material plus job charges. The Larger Bench view in Sterlite Industries was found inapplicable on the facts.

Conclusion: The duty demand on the rectangular copper bars was upheld against the appellant.

Issue (ii): Whether the extended period of limitation and penalty were invocable in the facts of the case.

Analysis: The appellant had not disclosed to the department that the rectangular bars in dispute were manufactured from copper wire bars procured from outside. This non-disclosure justified application of the extended period. In consequence, the penal provisions were also attracted.

Conclusion: The extended period of limitation and penalty were held to be correctly invocable against the appellant.

Final Conclusion: The impugned order confirming duty, limitation consequences, and penalty was sustained, and the appeal failed in entirety.

Ratio Decidendi: In a job-work arrangement under Notification No. 214/86-C.E., where the job-worker substitutes principal-manufacturer material with externally procured material and uses credit on that material, the resultant goods are assessable on the cost of such material plus job charges, and non-disclosure of this substitution justifies the extended period and penalty.

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