Job-work valuation rule inapplicable to steel structures used in works contracts; penalty for undervaluation also failed.

Rule 10A(ii) of the Central Excise Valuation Rules did not apply to steel structures fabricated on job-work and consumed by a civil contractor in execution of a works contract, because the goods were not transferred for subsequent sale by a principal manufacturer and were not intended for resale. The invoices were proper Central Excise invoices, and the factual matrix showed consumption in the contract work rather than ordinary trade. In the absence of evidence of planned evasion or knowing involvement in undervaluation, penalty under Rule 26 of the Central Excise Rules was also not sustainable. Relief was granted to the assessee.

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Issues: Whether Rule 10A(ii) of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 applied to steel structures fabricated on job-work and used by a civil contractor in execution of a works contract, and whether penalty under Rule 26 of the Central Excise Rules, 2002 was sustainable.

Analysis: The goods were procured against proper Central Excise invoices and were admittedly consumed in execution of a works contract, not sold in the ordinary course of trade or business. Rule 10A(ii) operates where job-worked goods are not sold at removal but are transferred to another place for subsequent sale by the principal manufacturer. That condition was absent here because the appellant was not acting as a principal manufacturer and the goods were not intended for resale. In the absence of evidence of any planned evasion or knowing involvement in undervaluation, the basis for fastening penal liability also failed.

Conclusion: Rule 10A(ii) was held inapplicable to the appellant, and the penalty under Rule 26 was not sustainable. The relief was in favour of the assessee.

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