Modvat credit on inputs excluded from assessable value in job-work valuation under central excise rules.

Duty paid on inputs for which Modvat credit was availed is not includible in the assessable value of goods manufactured on job work basis under Section 4(1)(b) of the Central Excise Act and Rule 6(b)(ii) of the Central Excise (Valuation) Rules. The Tribunal distinguished Mysore Paper Mills as dealing with deduction of duty on the packed final product, and applied the Larger Bench ruling in Dai-Ichi Karkaria, which treats Modvat credit on inputs as outside the assessable value of the final product. The impugned valuation order was set aside.

---

---

Issues: Whether the duty paid on inputs, in respect of which Modvat credit had been availed, was includible in the assessable value of goods manufactured on job work basis for the purpose of valuation under Section 4(1)(b) of the Central Excise Act and Rule 6(b)(ii) of the Central Excise (Valuation) Rules.

Analysis: The dispute concerned valuation of LPG cylinders manufactured on job work basis using customer-supplied materials, where the assessee had taken the inputs at ex-duty value while computing assessable value. The Tribunal held that the Supreme Court decision in Mysore Paper Mills dealt with deduction of duty on the packed final product under Section 4(4)(d)(ii) and did not govern exclusion of duty paid on inputs. The Larger Bench ruling in Dai-Ichi Karkaria, which recognised that Modvat credit on inputs is not includible in the assessable value of the final product under Section 4(1)(b) and Rule 6(b)(ii), was held to govern the present case as well.

Conclusion: The duty paid on inputs in respect of which Modvat credit was availed was not includible in the assessable value, and the impugned order was set aside.

---