Job-work valuation under excise exemption counts labour charges only, but excess clearances include customer-supplied raw materials.

For job-work manufacture, the value of clearances for exemption under Notification No. 105/80 was confined to labour or job-work charges, and the value of customer-supplied raw materials was not added for computing the exemption limit. Once the exemption threshold was exceeded, further clearances lost notification benefit and assessable value was required to be determined under the general valuation rule by including the value of raw materials supplied by customers. The petition was thus partly allowed on the exemption computation issue, while duty on excess clearances was payable on assessable value including supplied materials.

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Issues: (i) Whether, for the purpose of availing the exemption under Notification No. 105/80, the value of clearances from job work goods was to be computed only on job work charges or by including the value of raw materials; (ii) Whether, after the exemption limit was exceeded, the assessable value of the manufactured goods was to be determined under Section 4 by including the value of raw materials supplied by customers.

Issue (i): Whether, for the purpose of availing the exemption under Notification No. 105/80, the value of clearances from job work goods was to be computed only on job work charges or by including the value of raw materials.

Analysis: The exemption notification applied to the first clearances up to the prescribed monetary limit, and the controversy was whether the value of job-work goods should include the customer-supplied raw material. The Court applied the then prevailing law on valuation of job-work manufacture and accepted that, for computing the clearance value for the exemption limit, only the labour or job-work charges were relevant and the raw material value was not to be added.

Conclusion: The issue was decided in favour of the petitioners, and the impugned orders were quashed to the extent they treated raw-material value as part of the clearance value for the exemption.

Issue (ii): Whether, after the exemption limit was exceeded, the assessable value of the manufactured goods was to be determined under Section 4 by including the value of raw materials supplied by customers.

Analysis: Once the duty-free limit under the exemption notification was crossed, the goods ceased to be entitled to the notification benefit for further clearances. The Court held that the assessable value for such excess clearances had to be determined in accordance with the general valuation provision, and the raw materials supplied to the petitioners were to be included for that purpose.

Conclusion: The issue was decided in favour of the revenue, and duty on clearances beyond the exemption limit was to be computed on the basis of assessable value including raw materials.

Final Conclusion: The petition succeeded in part: the clearance value for the exemption was confined to job-work charges, while excess clearances were liable to duty on assessable value including the value of supplied raw materials.

Ratio Decidendi: For job-work manufacture, the value relevant to an exemption-limit computation may be confined to labour or manufacturing charges, but once the exempt threshold is crossed, valuation for excise duty proceeds under the general valuation provision and includes the value of materials supplied by the customer.

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