Job-work valuation cannot include notional profit absent proof of extra consideration to the job-worker.

In valuing goods manufactured on job-work basis, a separate notional profit addition over and above agreed job charges is not justified unless the department proves that the job-worker received additional consideration beyond those charges. The Tribunal relied on prior decisions and the Board's view that job-work charges ordinarily include the job-worker's profit element. As the Revenue made only a general allegation and failed to show any extra flow of funds or other consideration to the job-worker, the proposed 10% profit addition was held unsustainable and the valuation adopted by the lower authorities could not stand.

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Issues: Whether, in valuing goods manufactured on job-work basis, a notional 10% profit over and above the job charges could be added when the department had not shown any additional flow of funds to the job-worker.

Analysis: The valuation dispute turned on whether the job-work charges already included the job-worker's profit element. The Tribunal noted prior decisions holding that, unless the department establishes that the job-worker received something more than the agreed job charges, there is no warrant for adding a separate element of manufacturing profit. The Board's view on valuation of job-work goods was also consistent with the understanding that job-work charges encompass the profit margin of the job-worker. On the facts, the Revenue had made only a general allegation and had not established any additional consideration passing to the job-worker.

Conclusion: The addition of notional profit was not sustainable and the valuation adopted by the lower authorities could not be upheld.

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