Processed fabrics valuation excludes exporter profit margin where independent processing determines intrinsic assessable value.

In valuation of processed fabrics on a best judgment basis, the assessable value must reflect the intrinsic value of the processed goods under the valuation rules. Where processing is done by an independent processor using its own capital, plant, machinery, dyes, chemicals and labour, and there is no basis to treat the garment exporter as the real manufacturer, the exporter's gross margin of profit is not part of the assessable value. The cost of grey fabrics, transport charges and processing charges may be included, but the exporter's margin does not form an element of the processed fabrics' value.

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Issues: Whether, in the valuation of processed fabrics subjected to excise duty on a best judgment basis, the gross margin of profit of the garment exporter who sent the fabrics for processing could be included in the assessable value.

Analysis: The fabrics were processed by an independent processor working with its own capital, plant, machinery, dyes, chemicals, and labour, and there was no evidence to treat the garment exporter as the real manufacturer of the fabrics. The assessable value had to be determined under the valuation rules on the basis of the intrinsic value of the processed fabrics. The cost of grey fabrics, transport charges, and processing charges formed part of that value, but the exporter was only the user of the fabrics and not a manufacturer of them. Its margin of profit therefore did not represent an element of the processed fabrics' intrinsic value.

Conclusion: The gross margin of profit of the garment exporter could not be added to the assessable value of the processed fabrics, and the assessee's position was upheld.

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