Job-work valuation under Ujagar Prints stays confined to processing value; trader's selling price cannot replace it absent proof of distortion.

In a genuine job-work arrangement, assessable value is confined to the grey fabric value plus processing charges, manufacturing expenses and manufacturing profit; the trader's post-manufacturing marketing expenses and profit are excluded. A mere relationship between the trader and the job worker does not justify abandoning the Ujagar Prints valuation method unless it is shown that the relationship depressed the processing charges or altered the transaction at arm's length. On that footing, the trader's selling price could not be adopted for assessment, and the consequential duty demand, interest, penalties and confiscation could not survive.

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Issues: (i) Whether the trader's relationship with the job worker justified rejecting the Ujagar Prints valuation method and adopting the trader's selling price for assessment; (ii) Whether the demand of duty, interest, penalties and confiscation could be sustained on the facts.

Issue (i): Whether the trader's relationship with the job worker justified rejecting the Ujagar Prints valuation method and adopting the trader's selling price for assessment.

Analysis: The assessable value in a job-work arrangement is the value of the grey fabric in the hands of the processor together with job-work charges, manufacturing expenses and manufacturing profit. The trader's later marketing expenditure and profit are post-manufacturing elements and do not enter the assessable value. The record showed that the assessee did job work for numerous independent traders on the same terms, that the charges recovered were not depressed, and that there was no flow back. The mere existence of relationship, without proof that it influenced the processing charges or commercial terms, did not take the case out of the Ujagar Prints principle.

Conclusion: The trader's selling price could not be adopted for valuation, and the assessee's valuation method was held to be correct.

Issue (ii): Whether the demand of duty, interest, penalties and confiscation could be sustained on the facts.

Analysis: Once the valuation basis failed, the foundation for the differential duty demand also failed. The consequential levy of interest, penalties on the assessee and others, and confiscation with redemption fine could not survive. The separate demand based on alleged excess and shortages had already been set aside in appeal, and the impugned order was therefore unsustainable in full.

Conclusion: The duty demand, interest, penalties and confiscation were set aside.

Final Conclusion: The appeals succeeded, the impugned order was set aside in entirety, and the assessee obtained full relief including refund of the amount deposited.

Ratio Decidendi: In a genuine job-work arrangement, the assessable value is confined to the grey fabric value plus processing charges, manufacturing expenses and manufacturing profit, and the trader's post-manufacturing profit or expenses cannot be added merely because the trader and job worker are related, absent proof that the relationship depressed the processing charges or otherwise altered the transaction at arm's length.

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