Job work valuation excludes principal-supplied inputs from assessable value when processing is covered by the job work exemption framework.

In job work carried out under Rule 57F(3) of the Central Excise Rules, 1944, Rule 4(5)(a) of the Cenvat Credit Rules, 2004, and Notification No. 214/86-CE, the value of materials supplied by the principal manufacturer is not includible in the assessable value of the job-worked goods. The analysis treats the activity as pure job work where the job worker is paid processing charges, while duty on the final product rests with the principal manufacturer. Applying the principle in International Auto Ltd., the supplied valve bodies could not be added to the assessable value of the rubber products manufactured on job work basis, so the duty demand and penalties on that component were unsustainable.

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Issues: Whether, in job work undertaken under Rule 57F(3) of the Central Excise Rules, 1944 and Rule 4(5)(a) of the Cenvat Credit Rules, 2004 read with Notification No. 214/86-CE dated 25/3/1986, the value of valve bodies supplied by the principal manufacturer was required to be included in the assessable value of the rubber products manufactured by the job worker.

Analysis: The appellant manufactured rubber products on its own and discharged duty on those products and on the job work charges. The valve bodies were received under job work challans from the principal manufacturer, and the work done on those bodies was held to be a pure job work activity covered by the cited job work provisions and the exemption notification. As the principal manufacturer was responsible for duty on the final product in which the job-worked goods were used, the value of the supplied valve bodies could not be added to the assessable value of the job-worked goods. The decision followed the principle laid down in International Auto Ltd., distinguishing inclusion of free inputs in a final product from duty liability on an intermediate job-work product.

Conclusion: The value of the valve bodies was not includible in the assessable value, and no excise duty was payable on that component; the demand and penalties were unsustainable.

Ratio Decidendi: Where goods are processed on job work basis under the applicable job work provisions and exemption notification, the value of materials supplied by the principal manufacturer is not includible in the assessable value of the job-worked goods.

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