Job-work valuation must be based on the job worker's manufacturing cost, not the loan licensee's resale price.

In job-work manufacturing for a loan licensee, assessable value must be determined by reference to the cost of manufacture incurred by the job worker, not the resale price at which the loan licensee sells the goods. The Tribunal noted that the lower authorities had not properly examined Rule 6(b)(ii) of the Valuation Rules, 1975, and applied the settled Supreme Court principle that valuation should reflect the value attributable to the job worker's manufacture. The operative effect is that resale margins or sale prices charged by the loan licensee are not the correct basis for assessable value in such cases.

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Issues: Whether the assessable value of goods manufactured by job workers for a loan licensee was to be determined on the basis of the value at which the goods were sold by the loan licensee or on the basis of the cost of manufacture incurred by the job worker.

Analysis: The dispute concerned valuation of ayurvedic medicaments manufactured on job-work basis, where the department adopted the price at which the loan licensee sold the goods. The Tribunal noted that in such cases the settled principle is that the assessable value is the value attributable to the job worker's manufacture, and that the lower authorities had not properly examined Rule 6(b)(ii) of the Valuation Rules, 1975. The Tribunal followed the principle laid down by the Supreme Court that valuation must proceed on the cost at which the goods are manufactured by the job worker.

Conclusion: The assessable value was required to be determined on the basis of the cost of manufacture by the job worker, not the resale price charged by the loan licensee.

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