Excise valuation excludes Modvat duty on inputs while including job-worker profit within the assessable value computation.

Excise valuation of job-worked goods applies settled principles that exclude excise duty on raw materials where Modvat credit has been availed from the production cost of the final product. The assessable value must instead be computed on the basis of the raw material value, job-work charges, manufacturing profit and processing expenses. The job worker's profit is relevant only to the extent required by the valuation formula, rather than as a separate unrestricted addition. The note clarifies that Modvat-related duty is not includible in cost, while job-worker profit remains part of the assessable value within the governing computation.

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Issues: (i) Whether excise duty paid on raw materials, where Modvat credit was availed, forms part of the cost of production for valuation of excisable products; (ii) whether, and to what extent, the profit earned by the job worker is to be included in the assessable value.

Issue (i): Whether excise duty paid on raw materials, where Modvat credit was availed, forms part of the cost of production for valuation of excisable products.

Analysis: The governing principle laid down in the earlier decision on valuation of excisable goods was applied. Where duty on inputs has been taken credit of under Modvat, such duty is not to be loaded into the cost of production of the final excisable product.

Conclusion: The excise duty paid on Modvatted raw materials is not includible in the cost of production.

Issue (ii): Whether, and to what extent, the profit earned by the job worker is to be included in the assessable value.

Analysis: The valuation of job-worked goods was held to depend on the value of the raw material, the value of the job work done, the manufacturing profit, and the processing expenses. The job worker's profit is therefore relevant to the extent indicated in the governing valuation formula.

Conclusion: The job worker's profit is includible to the extent required in the valuation computation along with raw material value, job-work charges, and processing expenses.

Final Conclusion: The valuation dispute was resolved by applying the settled principles governing excisable value, resulting in partial relief on the inclusion of Modvat-related duty and clarification on inclusion of job-worker profit.

Ratio Decidendi: For valuation of excisable goods, duty on inputs covered by Modvat credit is excluded from production cost, and job-work valuation must include the value of raw materials, processing charges, manufacturing profit, and relevant expenses.

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