Job worker's assessable value cannot include principal manufacturer's input costs when final products cleared by principal

CESTAT Ahmedabad set aside demand for inclusion of principal manufacturer's input costs in job worker's assessable value. Following SC precedent in International Auto Limited, tribunal held that where principal manufacturer supplies parts to job worker and clears final products on payment of duty, the value of principal's supplied parts cannot be included in job worker's assessable value. Appeal allowed, demand unsustainable.

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Issues:
Whether the cost of inputs supplied by the principal manufacturer to the job worker is includible in the assessable value of goods manufactured by the job worker and supplied to the principal manufacturer.

Analysis:
The case involved the question of whether the cost of certain inputs supplied by the principal manufacturer to the job worker should be included in the assessable value of the goods manufactured by the job worker. The appellant, a job worker, had manufactured excisable goods using both their own components and parts supplied by the principal manufacturer. The principal manufacturer had cleared the final products on payment of duty. The appellant argued that based on previous Supreme Court judgments, the value of parts supplied by the principal manufacturer should not be included in the assessable value of the job work goods. The Tribunal examined the facts and referred to the Supreme Court judgment in International Auto Limited, where it was held that if the principal manufacturer clears the final goods on payment of duty, the value of parts supplied by them to the job worker should not be included in the assessable value of the job work goods. The Tribunal found the facts in the present case to be identical to the International Auto Limited case and ruled in favor of the appellant.

The appellant relied on the judgment in International Auto Limited and another case of Manon & Menon Limited, where the Supreme Court had held that the manufacturer of final products could adjust the credit on inputs supplied to intermediate purchasers. The Tribunal, following these judgments, dismissed the appeal against the demand raised on the job worker. The Tribunal concluded that the cost of parts supplied by the principal manufacturer should not be included in the assessable value of the job worker's goods. As a result, the impugned order was set aside, and the appeal was allowed in favor of the appellant.

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