Job-work excise valuation must follow the actual manufacturer's cost-construction, not the brand owner's later selling price.

In job-work manufacture of patent and proprietary medicaments under a loan licence arrangement, excise valuation is to be based on the actual manufacturer's cost-construction, namely raw material cost, labour charges and job-worker profit. The brand owner's later selling price is not the assessable value for central excise where the job worker is the manufacturer. The text states that the lower authorities applied the principal manufacturer's sale price, but that approach could not be sustained under the settled valuation principle for job-work production.

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Issues: Whether the excise duty was required to be computed on the selling price of the brand owner or on the cost-construction basis in the hands of the job worker who actually manufactured the goods.

Analysis: The dispute concerned a loan licence arrangement where raw materials and packing materials were supplied to a job worker for manufacture of patent and proprietary medicaments. The lower authorities proceeded on the basis that the principal manufacturer's sale price determined the duty liability, instead of treating the job worker as the actual manufacturer for central excise purposes. The Tribunal applied the settled position that, for excise, the duty attaches to the actual manufacturer and the assessable value in job-work manufacture is the aggregate of raw material cost, labour charges, and job-worker profit, not the subsequent selling price of the brand owner.

Conclusion: The issue was decided in favour of the assessee; the job worker's cost-construction value was the correct basis of assessment, and the brand owner's sale price could not be adopted.

Final Conclusion: The demand and penalties could not be sustained on the valuation adopted by the lower authorities, and the appeal succeeded.

Ratio Decidendi: In job-work manufacture, excise duty is payable on the assessable value determined at the stage of manufacture, comprising the cost of raw material, labour charges, and job-worker profit, and not on the later sale price of the brand owner.

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