Job-worker valuation follows deemed factory gate price; principal manufacturer's depot sale price cannot replace it

Valuation of excisable goods manufactured by a job worker remains governed by the settled factory-gate principle: the job worker's premises are treated as the deemed factory gate, and assessable value is determined there rather than by reference to the principal manufacturer's later depot sale price. The transaction value concept did not alter that position, and the valuation rules apply only in their prescribed circumstances. Where the dispute rests solely on substituting the principal's depot price, without any allegation of undervaluation by omission of cost elements, that substitution is impermissible and the related demand, penalty and interest cannot be sustained.

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Issues: Whether, in valuing excisable goods manufactured by a job worker, the assessable value is to be determined on the basis of the price at which the principal manufacturer sells the goods from its depots, or on the basis of the job worker's own factory-gate value under the settled valuation principles.

Analysis: The valuation of goods in the hands of a job worker remains governed by the settled principle that the job worker's factory gate is the deemed factory gate and removal from that premises is the relevant removal for assessment. The introduction of the transaction value concept did not alter that basic position. Section 4(1)(b) and the valuation rules apply only where value cannot be determined under Section 4(1)(a), and Rule 7 is attracted when goods are removed by the manufacturer to his own depot or similar place. Here the department did not dispute that the appellant was a manufacturer, nor did it allege undervaluation by omission of cost elements; its case rested only on adoption of the principals' depot sale price, which was not permissible on the facts found.

Conclusion: The adoption of the principal manufacturers' depot sale price was unsustainable, and the demand, penalty, and interest could not be maintained against the assessee.

Ratio Decidendi: In the case of goods manufactured by a job worker, assessable value must be determined at the job worker's deemed factory gate in accordance with the settled valuation principle, and the principal's depot sale price cannot be substituted merely because the goods are later stock transferred and sold from the principal's depots.

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