Job-work valuation excludes customer-supplied raw materials where Modvat credit applies, preventing double taxation of the same value.

In job-work manufacturing, the value of raw materials supplied by customers and received under Rule 57F challans is not included in the assessable value of the intermediate or final goods where the principal manufacturer is entitled to Modvat credit. The settled principle applied is that customer-supplied materials do not form part of the job worker's assessable value, and the same value cannot be taxed again merely because the manufacture is carried out by a job worker. On that basis, inclusion of the supplied-material value was held unjustified and the demand failed.

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Issues: Whether, in the case of job work, the value of raw materials supplied by customers and received under Rule 57F challans was required to be included in the assessable value of the intermediate/final goods manufactured by the job worker.

Analysis: The dispute turned on the settled principle that where raw materials are supplied for job work and the principal manufacturer is entitled to Modvat credit, the job worker is not required to add the value of such materials to the assessable value of the goods manufactured by him. The decision followed the view that the value of customer-supplied raw materials does not form part of the assessable value in such circumstances, and that the same value should not be brought to tax again merely because the manufacturing activity is carried out by a job worker.

Conclusion: The inclusion of the value of customer-supplied raw materials in the assessable value was not justified, and the demand failed.

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