Job work valuation must reflect raw material cost and processing charges; extended limitation fails without suppression.

In job work valuation, assessable value must be based on the cost of raw materials supplied by the buyer plus processing charges, manufacturing profit and related expenses, rather than the price charged to independent buyers. Where the assessee had disclosed the price list and RT-12 returns and the department already had the relevant facts, extended limitation could not be invoked for want of suppression. On the same basis, the connected penalty was unsustainable. The valuation adopted on a job work basis was accepted, and the duty demand and penalty were set aside.

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Issues: (i) Whether the assessable value of goods manufactured on job work basis was required to be determined on the price charged to independent buyers or on the basis applicable to job work; and (ii) whether the extended period of limitation and penalty were sustainable.

Issue (i): Whether the assessable value of goods manufactured on job work basis was required to be determined on the price charged to independent buyers or on the basis applicable to job work.

Analysis: The goods were manufactured from raw materials supplied by the buyer and processed on job work basis. In such a case, the valuation had to follow the principles governing job work, not the normal trade price charged to other buyers. The assessable value was to reflect the raw material cost, processing/job work charges, manufacturing profit and related expenses, treating the transaction as if the processed goods were sold by the job worker at the deemed factory gate.

Conclusion: The assessable value could not be taken on the basis of the price charged to other buyers; the assessee's valuation on job work basis was correct and is upheld in favour of the assessee.

Issue (ii): Whether the extended period of limitation and penalty were sustainable.

Analysis: The assessee had filed the price list and RT-12 returns, and the department had all relevant facts before it. On those facts, there was no material suppression to justify the extended period. Once the duty demand itself was unsustainable on limitation, the connected penalty also could not survive.

Conclusion: The extended period of limitation was not invocable and the penalty was not justified, in favour of the assessee.

Final Conclusion: The valuation adopted by the assessee on job work basis was accepted, the duty demand and penalty were set aside, and the appeal was allowed.

Ratio Decidendi: In job work valuation, assessable value must be determined on the basis of raw material cost plus processing and related charges, and the extended limitation period cannot be invoked absent suppression of material facts already disclosed to the department.

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