Job-work valuation of processed fabric cannot be reopened behind the trader's declared price, and extended limitation fails without suppression.

In job-work valuation of processed grey fabric, the declared selling price furnished by the trader was treated as the proper basis, and the excise authorities were not entitled to reopen that value by probing the trader's alleged profit or undervaluation; the additional duty demand on this ground was unsustainable. On limitation, the notice was issued well beyond six months, the Department already had the relevant facts, and the extended period was unavailable; the demand was therefore barred by limitation. The adjudication order was set aside and consequential relief followed.

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Issues: (i) whether, in the case of processing of grey fabric on job work basis, the assessable value could be reworked by the excise authorities behind the selling price declared by the trader for the processed goods; and (ii) whether the demand was barred by limitation.

Issue (i): whether, in the case of processing of grey fabric on job work basis, the assessable value could be reworked by the excise authorities behind the selling price declared by the trader for the processed goods

Analysis: The declared selling price furnished by the trader was the basis on which the job worker paid duty. The legal position governing valuation of job-worked processed fabric required acceptance of the trader's declared price for the processed goods, limited to the processor's manufacturing value, expenses and profit. The excise authorities were not entitled to go behind that declared price and substitute their own computation by probing into the trader's profit or alleged undervaluation.

Conclusion: The valuation adopted by the job worker was upheld and the additional duty demand on this ground was not sustainable.

Issue (ii): whether the demand was barred by limitation

Analysis: The notice covered a period far beyond six months from the date of issuance. The Department had all the relevant materials when the fabric was received and processed, and mere failure to act earlier could not justify recourse to the extended limitation period. On the facts found, the extended period was unavailable.

Conclusion: The demand was barred by limitation.

Final Conclusion: The appellate authority set aside the adjudication order in full and granted consequential relief, so the assessee succeeded on both valuation and limitation.

Ratio Decidendi: In job-work valuation of processed fabrics, duty is to be levied on the declared selling price supplied by the trader, and the excise authorities cannot reopen that declared value or shift the trader's alleged undervaluation onto the job worker; where the Department had the relevant particulars and no suppression by the job worker is shown, the extended period of limitation is not invocable.

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