Job-work valuation must follow cost-plus method when goods are returned to the supplier, not comparable-goods valuation.

Goods manufactured on job-work basis from materials supplied by the customer and returned to that supplier are to be valued on a cost-plus basis, namely raw-material cost, labour charges and profit. Rule 6(b) of the Central Excise (Valuation) Rules, 1975 applies only where excisable goods are not sold by the assessee but are used or consumed in the manufacture of another article, so the comparable-goods method was inapplicable here. The costing data already reflected job-work charges covering labour and profit, and the demand was therefore not sustainable. The impugned orders were set aside and the assessee's valuation was accepted.

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Issues: Whether the assessable value of goods manufactured on job-work basis and returned to the raw-material supplier could be determined by reference to the assessee's own comparable goods, or was required to be computed on the basis of the cost of raw materials, labour charges and profit.

Analysis: Rule 6(b) of the Central Excise (Valuation) Rules, 1975 applies where excisable goods are not sold by the assessee but are used or consumed in the manufacture of another article. The goods in question were not so used or consumed; they were manufactured from materials supplied by the customer and returned to that customer. In such a case, the valuation is governed by the settled job-work principle under which assessable value is based on the cost of raw materials plus labour charges and profit. The costing data submitted by the appellant already included job-work charges covering labour and profit, and the comparable-goods approach was not applicable.

Conclusion: The demand was not sustainable and the valuation adopted by the appellant was accepted.

Final Conclusion: The appeal succeeded, and the impugned orders were set aside because the valuation of job-work goods had to be determined on a cost-plus basis rather than by reference to comparable goods.

Ratio Decidendi: Goods manufactured on job-work basis from materials supplied by another and returned to that supplier are to be valued on the basis of raw-material cost, labour charges and profit, and not by reference to comparable goods under Rule 6(b) of the Central Excise (Valuation) Rules, 1975.

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