Job-work value cannot be added to assessable value where processing goods are returned under the exemption notification.

In a job-work arrangement governed by Notification No. 214 of 1986, the value of goods received on challans for processing could not be added to the assessable value of the manufacturer's own cleared goods. The processing goods were returned to the principal after endorsement on the challans, completing that transaction, and central excise law provided no basis to load their value into the assessee's manufactured outer component. The Revenue's cited precedent was found inapplicable. On that footing, the duty demands, penalties, and related interest based on the show cause notices were unsustainable and were set aside with consequential relief.

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Issues: Whether the value of goods received for job work on challans could be included in the assessable value of the outer component manufactured and cleared by the assessee.

Analysis: The goods received for job work were returned to the principal after processing, and the law did not provide for adding the value of such received goods to the value of the goods manufactured by the assessee. The job work arrangement was separately governed by Notification No. 214 of 1986, under which the principal manufacturer assumes the duty liability on the goods emerging from job work and the job worker is exempted. Once the goods are returned to the principal by endorsement on the challans, the transaction stands completed, and there was no basis in central excise law to load the job-work value into the assessee's manufactured goods. The precedent relied upon by the Revenue was also found inapplicable.

Conclusion: The inclusion of job-work value in the assessable value was not justified, and the demand and penalties based on both show cause notices were unsustainable.

Final Conclusion: The appeals succeeded and the duty demands, penalties, and related interest liabilities based on the impugned notices were set aside with consequential relief.

Ratio Decidendi: In a job-work arrangement governed by the applicable exemption notification, the value of goods received for processing cannot be included in the assessable value of the manufacturer's own cleared goods in the absence of a statutory provision permitting such inclusion.

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