Job-work valuation excludes separately duty-paid scrap, bought-out accessories, and duplicated profit from assessable value.

In job-work valuation of drums, only the cost of raw materials used in manufacture and the agreed fabrication charges are includible in assessable value. The commentary states that bought-out lids supplied separately were accessories, not components of manufacture, and their cost was not includible. It also says balance-sheet profit could not be added again where profit was already embedded in job charges, and scrap sale proceeds could not be loaded once scrap had been separately duty-paid. It further notes that an adjudicating authority cannot enlarge the demand beyond the scope of remand without a Revenue challenge.

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Issues: (i) whether the adjudicating authority could enhance the duty demand and rework the cost of raw material beyond the scope of remand; (ii) whether the cost of bought-out lids supplied along with the drums was includible in the assessable value; (iii) whether profit shown in the balance sheet could again be added to the assessable value when fabrication/job charges were already included; and (iv) whether the scrap sale proceeds could be added to the assessable value of the drums.

Issue (i): whether the adjudicating authority could enhance the duty demand and rework the cost of raw material beyond the scope of remand.

Analysis: The demand originally finalised was not appealed by the Revenue. In remand proceedings, the adjudicating authority enhanced the demand substantially and altered the unit cost and fabrication figures without contrary evidence to the certificates issued by the principals. An assessee cannot be placed in a worse position merely because it pursued an appeal, and the remand could not be used to enlarge the demand beyond the earlier finalisation in the absence of a Revenue challenge.

Conclusion: The enhancement of the demand and reworking of raw material cost beyond the remand direction was unsustainable and was set aside.

Issue (ii): whether the cost of bought-out lids supplied along with the drums was includible in the assessable value.

Analysis: The drums were manufactured without lids, and lids were supplied only in some cases for a limited period. The valuation principle applied for job-work goods requires inclusion of the cost of raw materials used in manufacture, not the value of items which do not take part in the manufacture of the goods. On the facts, the lids were bought-out accessories and not essential components whose value must necessarily form part of the drum value.

Conclusion: The cost of lids was not includible in the assessable value.

Issue (iii): whether profit shown in the balance sheet could again be added to the assessable value when fabrication/job charges were already included.

Analysis: Under the job-work valuation formula, the assessable value is based on the cost of raw material plus job charges, and the job charges already contain the job worker's profit element. There was no showing of any additional consideration over and above the agreed fabrication charges. Re-adding balance-sheet profit would amount to duplication of the profit already embedded in the job charges.

Conclusion: The profit element reflected in the balance sheet could not be separately added to the assessable value.

Issue (iv): whether the scrap sale proceeds could be added to the assessable value of the drums.

Analysis: The appellant had separately discharged duty on the scrap when it was removed. The settled view applied in job-work valuation is that once scrap value is already accounted for or separately duty-paid, it cannot again be loaded into the assessable value of the intermediate or finished goods. The demand on this count would amount to double inclusion. The availability of credit to the principal also supported the revenue-neutral nature of the transaction.

Conclusion: The scrap sale proceeds were not includible in the assessable value.

Final Conclusion: The demand failed on the principal valuation issues, the enhancement beyond remand was impermissible, and the assessee succeeded on the challenge to the impugned order.

Ratio Decidendi: In job-work valuation, only the cost of raw material and the job charges actually received are includible, and the adjudicating authority cannot enlarge the demand beyond the scope of remand or add items that are not part of the manufacturing value or are already separately accounted for.

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