Assessable excise value: with supplied materials, use processor's cost plus processor's profit and supplied material cost; exclude principal's profit.

SC allowed the appeal. Where a principal supplies raw materials to a processor for manufacture, the assessable excise value is the processor's manufacturing cost plus its profit (processing charges) together with the cost of raw materials supplied by the principal. The principal's own profit or expenses incurred after manufacture by the processor cannot be included in the processor's assessable value. The Court applied the ratio in prior precedents involving supplied materials and processing and rejected valuation based on the principal's wholesale cash price.

---

---

Issues:
Assessable value of biscuits manufactured for another company, classification of relationship between parties, consideration of post-manufacturing expenses in determining assessable value for excise duty.

Analysis:
The main issue in this case was the assessable value of biscuits manufactured by the appellant for another company, Britannia. The agreement between the parties outlined that Britannia supplied ingredients and manufacturing methods, and the appellant was to manufacture biscuits for Britannia. The agreement specified that the relationship between the parties was that of principal and principal, not principal and agent. The appellant was allowed to manufacture biscuits for other brands as well. The trouble began when the excise authorities sought to determine the assessable value based on Britannia's wholesale price, leading to a series of legal proceedings.

The appellant argued that post-manufacturing expenses should not be considered in determining the assessable value, citing a previous judgment in the case of M/s. Ujagar Prints and Others. In the Ujagar Prints case, the Supreme Court clarified that the assessable value should include the value of raw materials, job work done, manufacturing profits, and expenses. The Court emphasized that post-manufacturing profits should not be included in the assessable value. The judgment provided a clear framework for calculating the correct assessable value for excise duty purposes.

Applying the principles from the Ujagar Prints case to the present situation, the Court concluded that the assessable value of the biscuits should include the cost of raw materials supplied by Britannia, along with the appellant's manufacturing costs and profits. However, any profit or expenses incurred by Britannia after the manufacture of the biscuits should not be included in the assessable value. The Court found that the appellant was entitled to processing charges that covered expenses and profits but excluded post-manufacturing profits of Britannia. The judgment allowed the appeal, directing the excise authorities to determine the excise duty amount afresh in accordance with the law, without imposing any costs on either party.

---