Assessable value for job-work goods must reflect the job worker's cost and profit, not the trader's post-manufacturing margin.

For job-work manufacture, assessable value under Section 4 of the Central Excise Act is the normal price at which the goods are ordinarily sold at the time and place of removal, and must reflect the job worker's processing cost, expenses, charges and profit, not the trader's post-manufacturing margin. Where the assessee adopted the supplier's declared selling price for the job-work goods and duty was paid on that basis, the Department could not substitute the price of identical goods cleared on the assessee's own account merely because the assessee also manufactured and sold similar goods. The assessable value was therefore to be accepted on the basis adopted by the assessee, and the differential duty demand was unsustainable.

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Issues: Whether the assessable value of goods manufactured on job work basis was to be determined by adopting the price of the assessee's own clearances or the selling price declared by the supplier of raw materials.

Analysis: Under Section 4 of the Central Excise Act, the assessable value is the normal price at which the goods are ordinarily sold at the time and place of removal. For job-work production, the governing principle is that the job worker is the manufacturer and the value must include the processor's expenses, cost and charges plus profit, but not the trader's post-manufacturing profit. Where the assessee adopted the trader's selling price for the job-work goods and duty was paid on that basis, the Department could not substitute the price of identical goods sold on the assessee's own account merely because such goods were also manufactured and cleared by the assessee.

Conclusion: The assessable value of the job-work goods had to be accepted on the basis adopted by the assessee, and the demand for differential duty was unsustainable.

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