Valuation of Jobwork when material dicrectly supplied by principal manufacturer

[Mehul Pandya]

Sir,

Valuation of Jobwork includes Cost of material, processing charges, freight and profit. My query is does cost of material includes excise and sales tax also when raw material supplied directly by the principal manufacturer and payment done by principal manufacturer.

Some Particulars of the CASE

1. ABC - Principal Manufacturer

2. XYZ - Jobworker

3. Final Product - TIN Container

4. Raw Material - TIN Plate

5. Process - Manufacturing of TIN Container for the packing of Edible Oil

6. Raw Material payment done by the ABC directly

7. Freight Payment done by ABC directly.

8. Final Product of ABC is Exempted from duty (Edible Oil)

9. Job worker taking cenvat credit on Raw Material - TIN Plate.

Illustration :-

Rate per tin calculated by the jobworker

Ass. Value of Raw Material (Tin Plate)

Add: VAT/CST

Add: Freight
-------------------------

Basic Value of TIN (Manufactured) (without considering excise)
Add: Job charges

Add : Excise

Add : CST / VAT
--------------------------

Gross Total (Billed to Principal Manufacturer)

Query : (1) Whether excise should be considered while calculating cost of material to derive basic value of TIN manufactured or not. ??

(2) Is there any clarification / notification / circular in supporting to this ??

Your reply awaited.

Thank you

[YAGAY andSUN]

Dear Mehul,In Texmaco Ltd. vs. CCE,  1995 (77) E.L.T. 501 (SC) = 1991 (7) TMI 109 - SUPREME COURT OF INDIA, Supreme Court had held that value of article was full intrinsic value of article including cost of material and components supplied free by the customer. Assessable Value will be full commercial value.This is for your kind information.RegardsTeam YAGAYand SUN(Managementand Indirect Tax Consultants)

[MUKUND THAKKAR]

Dear Mehul.

In connection of please refer rule 10 along with the rules 8.9.

Mukund Thakkar

[PAWAN KUMAR]

Dear Sir,

As per your query, the answer is as under :

1.Excise duty will not be considered.

2.You may read Ujaagar Print Case.

AI Summary

Valuation of jobwork: whether material excise is included in basic value, with conflicting case and rule guidance. Query: whether material cost for jobwork valuation must include excise and sales tax when the principal supplies and pays for raw material and freight. Responses: one submission invokes Texmaco to treat the finished article at full commercial value including customer supplied material; another cites valuation rules 8-10; a third asserts that excise duty need not be included, citing Ujaagar Print. The discussion records conflicting authorities on inclusion of excise and sales tax in the basic value billed to the principal.