Transaction value for job-worked goods must be accepted under Rule 10A(i) absent transaction-specific evidence

Where job-worked finished goods are sold by the principal manufacturer to the job worker at the time of removal, and the buyer is unrelated with price as the sole consideration, Rule 10A(i) governs valuation and the declared transaction value must be accepted. The department cannot reject that value and resort to Rule 11 without transaction-specific evidence. A uniform profit loading, including a 41.48% margin, was unsupported where no comparable transactions were identified and the CAS-4 cost data supported the declared price. The valuation rework was therefore unjustified and the consequential duty demand could not stand.

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Issues: Whether the assessable value of finished goods manufactured by a job worker and sold by the principal manufacturer to the job worker was to be determined under Rule 10A(i) of the Central Excise (Determination of Price of Excisable Goods) Rules, 2000 or under Rule 11 of those Rules, and whether the department could reject the declared transaction value by adding a uniform profit margin without supporting transaction-specific evidence.

Analysis: The finished goods were manufactured by a job worker on behalf of the principal manufacturer and were sold by the principal manufacturer to the job worker at the time of removal. In such a situation, where the buyer is not related and the price is the sole consideration, Rule 10A(i) applies and the declared transaction value is the relevant value. There is no prohibition against sale of the finished goods to the job worker. The department's approach of rejecting the declared value and invoking Rule 11 was not sustained, particularly when no specific comparable transactions were identified to justify loading the cost with a profit margin of 41.48%. The CAS-4 based cost data furnished by the assessee supported the declared price, and the attempted adoption of lowest input price and highest selling price lacked legal and accounting basis.

Conclusion: Rule 10A(i) governed the valuation, the enhancement under Rule 11 was not justified, and the demand founded on the added profit margin could not stand.

Final Conclusion: The impugned order was set aside and the assessee obtained relief on valuation and the consequential duty demand.

Ratio Decidendi: Where job-worked goods are sold by the principal manufacturer at the time of removal to an unrelated buyer for sole consideration, the declared transaction value must be accepted under Rule 10A(i), and valuation cannot be reworked under the residuary rule without transaction-specific evidence justifying rejection of that value.

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