Job-work valuation of fabrics follows the Ujagar Prints cost-plus method; merchant resale price cannot drive differential duty.

In job-work clearances of grey man-made fabrics supplied by merchant manufacturers, assessable value is to be computed on the Ujagar Prints cost-plus basis, comprising raw material cost, job-work charges and the job worker's manufacturing profit. The merchant manufacturer's resale price is irrelevant for valuing the goods cleared by the job worker, and a notification requiring disclosure of that resale price cannot override the statutory valuation method under Section 4. On that basis, a differential duty demand cannot be sustained, and an allegation of suppression or misdeclaration also fails where it rests on the same incorrect valuation approach.

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Issues: Whether, in job-work clearance of grey man-made fabrics supplied by merchant manufacturers, the assessable value had to be determined on the basis of the merchant manufacturer's resale price, and whether Notification No. 305/77 could be invoked to sustain the differential duty demand.

Analysis: The processing was undertaken by a job worker for merchant manufacturers, and the valuation was governed by the settled principle in Ujagar Prints that the assessable value consists of the cost of the raw materials, the job-work charges, and the job worker's manufacturing profit. The merchant manufacturer's own selling price was therefore irrelevant for valuation of the goods cleared by the job worker. The notification requiring disclosure of the price at which the merchant manufacturer would sell the goods did not alter that valuation principle, because the statutory method of valuation under Section 4 prevailed. In the absence of a sustainable demand for differential duty on that basis, the allegation of suppression or misdeclaration also could not stand.

Conclusion: The differential duty demand was not sustainable, and the challenge by the assessees succeeded.

Ratio Decidendi: In job-work clearances, assessable value must be determined on the cost-plus basis laid down in Ujagar Prints, and a notification requiring disclosure of the merchant manufacturer's sale price cannot override that valuation method or support a differential duty demand.

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