Job-work valuation must exclude buyer's resale profit; captive-consumption rules do not apply without captive consumption.

Goods manufactured on a job-work basis are to be valued by adding the cost of materials supplied, the job worker's manufacturing cost, and manufacturing profit; the buyer's resale price and selling profit are excluded from assessable value. Rule 6(b)(i) of the Central Excise Valuation Rules, 1975 applies to captive consumption and cannot be invoked where goods are transferred under a job-work arrangement without captive consumption. The valuation method based on the buyer's selling price was therefore unsustainable, and the demand founded on that method could not stand.

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Issues: (i) Whether the assessable value of goods manufactured on job work basis was to be determined on the basis of the buyer's selling price or on the basis of the cost of materials supplied plus the job worker's manufacturing cost and manufacturing profit; (ii) whether Rule 6(b)(i) of the Central Excise Valuation Rules, 1975 was applicable when there was no captive consumption.

Issue (i): Whether the assessable value of goods manufactured on job work basis was to be determined on the basis of the buyer's selling price or on the basis of the cost of materials supplied plus the job worker's manufacturing cost and manufacturing profit.

Analysis: The goods were manufactured on job work basis under an agreement. The governing principle for such valuation was the rule laid down in Ujagar Prints and reiterated in the later Supreme Court ruling relied upon by the appellants, namely that duty is to be computed on the cost of materials supplied to the job worker together with the job worker's manufacturing cost and manufacturing profit. The buyer's selling cost and selling profit do not form part of the assessable value.

Conclusion: The assessable value had to be computed on the job-work basis and not on the buyer's resale price. This issue is decided in favour of the assessee.

Issue (ii): Whether Rule 6(b)(i) of the Central Excise Valuation Rules, 1975 was applicable when there was no captive consumption.

Analysis: Rule 6(b)(i) governs valuation of goods produced and captively consumed. The order itself proceeded on the footing that the goods were not captively consumed but were transferred under a job-work arrangement. On that basis, the rule could not be invoked for valuation.

Conclusion: Rule 6(b)(i) was not attracted. This issue is decided in favour of the assessee.

Final Conclusion: The valuation adopted in the adjudication order was unsustainable and the demand based on that method could not stand.

Ratio Decidendi: Goods manufactured on job work basis are to be valued by adding the cost of materials supplied, the job worker's manufacturing cost, and manufacturing profit, and not by including the buyer's selling price or profit; a captive-consumption valuation rule cannot be applied where there is no captive consumption.

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