Job-work valuation excludes retained scrap value from assessable value, and the related demand and penalty cannot stand.

Scrap retained by a job worker is not additional consideration for the goods cleared to the principal manufacturer and is therefore not includible in assessable value. CESTAT followed its own earlier decision and settled authority to hold that, where the principal manufacturer further consumes the goods and there is no material change in law, valuation under the job-work framework does not permit adding the money value of retained scrap. On that basis, the demand, with interest and penalty, was set aside as unsustainable.

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Issues: Whether the value of scrap retained by the job worker was includible in the assessable value of the job-worked goods cleared to the principal manufacturer, and whether the demand and consequential penalty could be sustained.

Analysis: The dispute arose from the department's inclusion of scrap value while re-determining the assessable value of rolled products manufactured on job work basis and cleared to the principal manufacturer. The Tribunal followed its earlier decision in the assessee's own case for an earlier period and the line of authority holding that the money value of scrap retained by the job worker does not constitute additional consideration for the clearance of the goods. It also noted that where the principal manufacturer does not resell the goods but consumes them further, valuation under the applicable job-work and valuation framework does not justify inclusion of scrap value. In light of the settled precedent and the absence of any material change in law, the demand based on scrap value could not survive.

Conclusion: The inclusion of scrap value in the assessable value was held to be unsustainable, and the demand with interest and penalty was set aside in favour of the assessee.

Ratio Decidendi: Scrap retained by a job worker is not additional consideration for the cleared goods and is not includible in the assessable value.

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