Job work valuation requires scrap sale proceeds to be deducted from raw material cost to prevent double counting in assessable value.

In job work valuation under Ujagar Prints, assessable value must reflect the cost of raw material, processing charges and the job worker's profit. Scrap sale proceeds arising during manufacture are to be set off against the raw material cost because they reduce the effective cost borne by the manufacturer. Without that adjustment, the raw material component would be counted twice, leading to an inflated assessable value. The commentary distinguishes cases treating scrap as additional consideration, noting that they did not address the raw-material side of the valuation exercise.

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Issues: Whether, in valuing goods manufactured by a job worker, the proceeds from sale of scrap generated during manufacture are to be deducted in computing the cost of raw material and assessable value.

Analysis: The valuation principle applied for job work under Ujagar Prints requires inclusion of the value of raw material, processing charges, and the job worker's profit. Those elements correspond, in substance, to the components of manufacturing cost. The same accounting principle governing manufacture on one's own account applies to job work as well: scrap sale proceeds reduce the effective cost of raw material because the manufacturer is reimbursed to that extent. Excluding such deduction would result in the raw material cost being counted twice, first in the raw material component and again in the job charges or additional consideration. The Tribunal distinguished earlier decisions that treated scrap value as additional consideration because they did not address the raw-material side of the valuation exercise.

Conclusion: The scrap sale proceeds are to be adjusted against the cost of manufacture in job work valuation, and the inclusion of such proceeds in assessable value was unsustainable.

Ratio Decidendi: In job work valuation, scrap sale proceeds generated in the manufacturing process reduce the cost of raw material and must be set off to avoid double counting in the assessable value.

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