S.N. Jha, J. (President)

1. These appeals came up for hearing before the Larger Bench on reference by a Division Bench.

2. Before referring to the term of reference, in order to appreciate the significance of the issue involved, it may be appropriate to briefly indicate the factual background giving rise to the dispute as follows: M/s. Eicher Motors Ltd. (in short Eicher) is engaged in the manufacture of chassis and ultimate sale of complete motor vehicle viz. bus and truck. M/s. Bhagirath Coach & Metal Fabricators Pvt. Ltd. (in short Bhagirath) is engaged in the body building for motor vehicles. Eicher supplies chassis to Bhagirath for building the bodies of bus/truck on job work basis. At the time of clearance - not being sale to Bhagirath - central excise duty is paid by Eicher on the value of the chassis worked out in terms of Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 i.e. 110% of the cost of manufacture of chassis. On receipt of the chassis, bodies of bus or truck are fabricated and mounted, atop the chassis, using some more raw materials received directly by Bhagirath though on the account of Eicher. After completing the job, the complete motor vehicle is returned to Eicher. At the time of clearance at their end, Bhagirath pays excise duty after availing the cenvat credit of the duty paid on the chassis as well as the directly received raw materials referred to above. However, the excise duty of the body built vehicle is worked out on the basis of actual cost of manufacture of chassis and not 110% of its cost. According to Bhagarith, the additional ten percent (of the cost of manufacture) represents the profit margin of the manufacturer i.e. Eicher which is not to be included in determining the assessable value of the body built vehicle. The point at issue is whether in determining the value of the motor vehicle, the actual cost of chassis manufactured by the principal manufacturer at its end, among other things (about which there is no dispute), is to be taken into account - as contended on behalf of the assessee, or the value of the motor vehicle is to be worked out on the basis of 110% of the cost of chassis in accordance with Rule 8 read with Rule 11 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, (in short, Excise Valuation Rules) as contended on behalf of the Revenue.

3. The Commissioner of Central Excise, Indore as Adjudicating Authority by his order under appeal held that for arriving at the assessable value of the complete motor vehicle, the assessable value of the chassis - being 110% of the cost of chassis, as declared by Eicher, had to be taken into account, and the calculation of assessable value of the body built vehicle by Bhagirath for the purpose of payment of central excise duty at their end was not in accordance with the decision of the Supreme Court in the case of Ujagar Prints 1989 (39) ELT 493 (SC). He thus held that Bhagirath was liable to excise duty taking into account the assessable value declared by Eicher, and as there had been contravention of the relevant provisions of the Central Excise Act and the Rules the appellants, namely Bhagirath, Eicher and Ashok Sharma, a Director of Bhagirath, were liable to penalty.

4. When the appeals came up for hearing before the Division Bench, reliance on behalf of the appellants was placed on a Bench decision of the Tribunal in Bhilwara Processors v. CCE 2004 (178) ELT 185 wherein it was held - dealing with the case of processed fabric - that the assessable value of processed fabric is to be arrived at on the basis of the cost of grey fabric supplied, and the notional valuation as envisaged in Rule 8 of the Excise Valuation Rules is not appropriate for determining the cost of the product. Doubting the correctness of the decision in Bhilwara Processors Ltd. the Division Bench referred the appeals to Larger Bench on the following questions:

(1) Whether the value of the excisable goods used for manufacture of other article, which is required to be worked out under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000, read with Rule 2(c) thereof which are made for the purpose of Section 4(1)(b) of the Central Excise Act, 1944, will be considered to be the value of such inputs, while assessing the value of such other article manufactured by the job worker

(2) Whether in arriving at the assessable value of the product manufactured by a job worker, the actual cost of the inputs supplied by the principal should be taken into account or the value of the inputs, as worked out under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 should be taken into account

5. Having regard to the term of reference, the correctness of the impugned order of the Commissioner as to imposition of penalty etc. was not gone into, and the hearing was confined to the manner of calculation of the assessable value of the motor vehicle at the hands of Bhagarith for the purpose of central excise duty at their end.

6. The fact - situation in the case of Ujagar Prints was somewhat similar to the present case, and M/s. Ujagar Prints - engaged in the processing of grey fabric was doing more or less a similar job as Bhagirath in the instant case. It had a factory which was equipped with machinery and plants for processing of grey fabric not capable of manufacturing grey fabric. The issue involved was whether processing of grey fabric is not a part, or continuation, of the process of manufacture in the manufacturing stream but an independent and distinct operation carried out in respect of grey fabric.

The issue also was what would be the correct principle to determine the assessable value of the processed grey fabric. Similar issues had already been answered by a Three Judges Bench of the Supreme Court in favour of the Revenue in the case of Empire Industries v. Union of India , the correctness of which was doubted in the case of Ujagar Prints and the matter came to be referred to the Bench of Five Judges. One of the points formulated was whether in the event, levy of excise duty on processed fabric is justified and processing is held to be manufacture, the computation of the assessable value of the processed grey fabric on the basis of a wholesale cash selling price declared under Rule 173B is unjustified and illegal in respect of the assessable value of the processed grey fabric done on job work basis. The Constitution Bench held vide decision reported in 1988 (38) ELT 535 (SC) known as Ujagar Prints II that the decision in Empire Industries case did not require re-consideration and the issue was answered in favour of the Revenue. In para 28 of the judgment the Supreme Court quoted the relevant finding in Empire Industries case, with approval, and it may be useful to extract the same as hereunder:

When the textile fabrics are subjected to the processes like bleaching, dyeing and printing etc. by independent processes, whether on their account or on job charges basis, the value for the purposes of assessment under Section 4 of the Central Excise Act will not be the processing charges alone but the intrinsic value of the processed fabric which is the price at which such fabrics are sold for the first time in the wholesale market. That is the effect of Section 4 of the. The value would naturally include the value of grey fabrics supplied to the independent processors for the processing. However, excise duty, if any paid on the grey fabrics will be given proforma credit to the independent processors to be utilised for the payment on the processed fabrics in accordance with the Rules 56A or 96D of the Central Excise Rules, as the case may be.

7. It would not be out of place to, also, quote the observations in the order by which Ujagar Prints case was referred to Larger Bench - extracted in paragraph 10 of the judgment in Ujagar Prints (supra) (at pages 544-45 of the Report). While dealing with methodology of valuation regarding the assessable value of processed fabric, the Referring Bench had observed:

10. It was common ground between the parties that the procedure followed by the Excise authorities was that the trader, who entrusted cotton or man-made fabrics to the processor for processing on the job-work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market and that would be taken by the Excise authorities as the assessable value of the processed fabrics and excise duty would be charged to the processor on that basis. This may be illustrated by giving the following example:

(1) Value of grey cloth in the hands of the processor: Rs. 20.00

(2) Value of job-work done: Rs. 5.00

Value of finished cloth returned to the trader (1+2): Rs. 25.00

(3) Traders selling price inclusive of his selling profits, etc. : Rs. 30.00

...

We cannot accept the contention of the learned Counsel on behalf of the petitioners and the appellants, that the value of the grey cloth which is processed by the processor should not be included in the assessable value of the processed fabric since the grey cloth is one of the raw materials which goes into the manufacture of the processed fabric and the value of the processed fabric cannot be commuted without including the value of the raw material that goes into its manufacture. The assessable value of the processed fabric, cannot therefore be limited merely to the value of the job-work done but it must be determined by reference to the wholesale cash price of the processed fabric at the gate of the factory of the processor.

...

...Thus in the example given above the assessable value of the processed fabric must be taken to be Rs. 20 + 5 that is Rs. 25 and the profit of Rs. 5 which the trader may make by selling the processed fabric cannot be included in the assessable value. The element of selling profit of the trader would be entirely an extraneous element and it cannot be taken into account for the purpose of determining the assessable value of the processed fabric which would comprise the value of the grey cloth and the job-work charges but exclude the profit at which the trader may subsequently sell the processed fabric.

8. The above logic was not accepted and the Larger Bench instead approved the decision in Empire Industries. It was observed:

The incidence of the levy should be uniform, uninfluenced by fortuitous consideration. The method of determination of the assessable value suggested by the processors would lead to the untenable position that while in one class of grey fabric processed by the same processor on bailment, the assessable value would have to be determined differently dependent upon the consideration that the processing house had carried out of processing operations on job work basis, in the other class of cases, as it not unoften happens, the goods would have to be valued differently only for the reason the same processing house has itself purchased the grey fabric and carried out the processing operations on its own.

9. Not satisfied with the declaration of law in Ujagar Prints affirming the decision in the Empire Industries, a miscellaneous application was filed on behalf of the processors seeking clarification of the judgment which came to be decided by the Five Judges Bench vide order - known as Ujagar Prints III reported in 1989 (39) ELT 493 (SC). Having regard to the significance of the findings and the observations in the said clarificatory order, the same may be quoted in extenso as under:

In respect of the civil miscellaneous petition for clarification of this Courts judgment dated 4th November, 1988, it is made clear that the assessable value of the processed fabric would be the value of the grey-cloth in the hands of the processor plus the value of the job work done plus manufacturing profit and manufacturing expenses whatever these may be, which will either be included in the price at the factory gate or deemed to be the price at the factory gate for the processed fabric. The factory gate here means the deemed factory gate as if the processed fabric was sold by the processor. In order to explain the position it is made clear by the following illustration: if the value of the grey-cloth in the hands of the processor is Rs. 20/- and the value of the job work done is Rs. 5/- and the manufacturing profit and expenses for the processing be Rs. 5/-, then in such a case the value would be Rs. 30, being the value of the grey-cloth plus the value of the job work done plus manufacturing profit and expenses. That would be the correct assessable value.

2. If the trader, who entrusts cotton or man-made fabric to the processor for processing on job work basis, would give a declaration to the processor as to what would be the price at which he would be selling the processed goods in the market, that would be taken by the Excise authorities as the assessable-value of the processed fabric and excise duty would be charged to the processor on the basis provided that the declaration as to the price at which he would be selling the processed goods in the market, would include only the price or deemed price at which the processed fabric would leave the processors factory plus his profit. Rule 174 of the Central Excise Rules, 1944 enjoins that when goods owned by one person are manufactured by another the information is required relating to the price at which the said manufacturer is selling the said goods and the person so authorised agrees to discharge all the liabilities under the said Act and the rules made thereunder. The price at which he is selling the goods must be the value of the grey-cloth or fabric plus the value of the job work done plus the manufacturing profit and the manufacturing expenses but not any other subsequent profit or expenses. It is necessary to include the processors expenses, costs and charges plus profit, but it is not necessary to include the traders profits who gets the fabrics processed, because those would be post-manufacturing profits.

10. On a close reading of the above order in Ujagar Prints III it would appear that the clarification squarely covers the dispute involved in the instant case as to the assessable value of the chassis at the hands of Bhagirath as a job worker and the final goods i.e. a complete motor vehicle. If - in the illustration given by the Supreme Court - the value of grey cloth in the hands of processor is Rs. 20/- and the value of the final product is Rs. 30/- - comprising of the value of the grey cloth plus value of the job work plus the manufacturing profit and expenses, it would follow that the value of complete motor vehicle would the value of chassis i.e. 110% of the cost of manufacture, say, Rs. 3,30,000/- plus value of the job work done by Bhagirath, say, Rs. 1,00,000/- plus the manufacturing profit and expenses of Bhagirath, say, Rs. 70,000/- again, that is, in all, Rs. 5,00,000/- which would be the correct assessable value of the complete vehicle. The value of the complete motor vehicle cannot be arrived at de hors the additional 10% of the cost of manufacture which is part of the value of the intermediate product i.e. chassis. In other words, the assessable value of complete motor vehicle cannot be determined on the basis of the cost of chassis without including the additional 10% of the manufacturing cost of chassis, which is part of the statutorily fixed value of the chassis (in case of non-sale) in terms of Rule 8 of the Excise Valuation Rules.

11. Ujagar Prints II and Ujjar Prings III came to be considered in CCE, Indore v. S. Kumars Ltd. . Referring to the former the Supreme Court observed that Ujagar Prints II was an unconditional approval of the ratio in Empire Industries and so far as processors are concerned, the assessable value of the processed goods would have to be the same whether they manufactured the goods and then processed it or process the goods given to them for job-work before returning the same to the manufacturer/owner. "That common norm was the wholesale price". However, Ujagar Prints III introduced the concept of deemed price in place of wholesale price and to this extent Ujagar Prints III was a deviation from the formula approved earlier. Referring to the clarificatory order, it was observed:

This clarification, in fact, was a deviation from the formula approved in Empire Industries. In other words, it was not the wholesale price at the merchant manufacturing stage which would be the assessable value of the processed goods, but the value of the processed fabrics on the basis of a deemed sale of the factory gate of the processor.... The actual wholesale price was jettisoned in favour of a deemed sale price by the processor to the merchant manufacturer.

[Emphasis added]

12. Shri V. Lakshmikumaran, learned Counsel for the appellants, however, submitted that the Ujagar Prints case involved the question as to valuation of the processed fabric i.e. the fabric processed by the job workers. He pointed out that the job workers in that and other connected cases were discharging duty only on the processing charges recovered by them. According to the Department, duty was required to be paid by them at the selling price including the profits and other post manufacturing expenses. The Supreme Court held that the contention of the Assessee that the duty is required to be paid only on the processing charges, is not correct. The Supreme Court also held that the contention of the Department that the duty is required to be paid on the sale price of the trader, also is not correct. All that was held in the clarificatory order i.e. in Ujagar Prints III was that the value of the raw materials at the hands of the trader must be taken into account along with the processing charges and profit of the job worker. It was submitted that judgment is to be understood as an authority on the point which is decided and not what follows from it. Reference in this regard was made to Mittal Engineering Works v. CCE and Sarva Shramik Sanghatana v. State of Maharastra . In sum, the submission of the counsel was that the decision in Ujagar Prints cannot be relied upon for the proposition that the value of the chassis is includible at the hands of the job worker.

13. It was submitted that in subsequent judgments viz. Pawan Bisucits Co. (P) Ltd. v. CCE and General Engineering Works v. CCE 2007 (212) ELT 295 (SC), the Supreme Court interpreted the word value referred to in Ujagar Prints to mean the actual cost of the raw materials. It was submitted that the Board (CBEC) also understands value to mean cost which is evident from Circular No. 619/10/2002-CX. Dated 19.2.2002 wherein it has been clarified that the actual cost of raw material is to be added at the hands of the job worker. Reference was also made to the Boards letter No. B.3/1/2003-TRU dated 18.6.2003. It was submitted that circulars are binding on the departmental authorities as held by the Supreme Court in CCE v. Dhiren Chemicals ; Ranadey Micronutrients v. CCE 11996 (86) ELT 19 (SC) and UOI v. Arviva Industries 2007 (209) ELT 5 (SC).

14. There cannot be any doubt that a judgment can be understood as a precedent for the issue which is directly raised, debated and decided; rest of the judgment merely binds the parties to the proceeding or dispute. We have referred to the observations and the findings of the Supreme Court in Ujagar Prints case, including the observations of the Referring Bench, as also the Empire Industries case approved in Ujagar Prints. Presently, we shall notice the cases cited by Shri Lakshmikumaran in support of the contention that the decision in Ujagar Prints was explained by the Supreme Court itself in the manner that value means actual cost of the raw material or intermediate product.

15. Heavy reliance was placed on the observation in para 16 of the judgment in Pawan Biscuits Co. (supra) that "the cost of the raw material supplied by Britannia will have to be included in addition to the actual cost and profit", and it was submitted that a similar interpretation was given in General Engineering Works (supra), Bhilwara Processors was decided by the Tribunal on that basis and the decision has been consistently followed by different Benches of the Tribunal.

16. It is settled law that the judgment of a Court is not to be read as words of statute; and in order to appreciate the real import of any observation, it is appropriate to read the judgment as a whole so as to find out the context in which the observation has been made. From the facts stated in the judgment in Pawan Biscuits it appears that the appellant had entered into agreement with M/s. Britannia Industries Ltd. for manufacturing biscuits for Britannia using the recipe and the methodology supplied by Britannia, on payment of duty. Dealing with the question as to the assessable value of biscuits manufactured by the appellant, the Supreme Court observed that the point in issue was no longer res Integra. After referring to the findings in the main judgment and the clarificatory order in Ujagar Prints, and after extracting the relevant passage therefrom, the Supreme Court observed as under:

16. The present case is similar to Ujagar Prints case. In Ujagar Prints case, it was the grey cloth which was given to the processor whereas in the present case it was the raw material for the manufacture of biscuits given to the appellant. After the biscuits are made, they are given back to or are delivered under the instructions of Britannia. The appellant was entitled to receive processing charges which include its expenses plus profits for the purpose of determining the excise value. However, the cost of the raw material supplied by Britannia will have to be included in addition to the appellants manufacturing costs and profit. What cannot be included on the ratio of Ujagar Prints case is any profit of Britannia or expenses which are incurred after the manufacture of the biscuits by the appellant. Despite repeated attempts made by the learned Counsel for the respondent, we are unable to distinguish this case from the ratio laid down by this Court in the aforesaid two decisions of Ujagar Prints case.

[Emphasis added]

17. From a bare reading it is clear the Supreme Court squarely followed the decision in Ujagar Prints case and the judgment cannot be read as laying down a different proposition. As a matter of fact, if we may say so with respect, a smaller Bench of two Judges could not have held otherwise, and if there is anything in the judgment at a tangent with Ujagar Prints case, the same cannot be binding in view of the Larger Bench decision. Indeed, use of the word cost rather than value in the extracted part of the judgment does not create any conflict, for, value in the hands of principal manufacturer of an intermediate product which is used as raw material, is cost of the raw material for the job worker but it does not mean that the assessable value of the goods will be its cost of production or manufacture. The observation of the Supreme Court - relied upon by the counsel has to be understood in that sense.

18. In the case of General Engineering Works v. CCE (supra) at the end of the para 3 of the judgment it was observed, likewise, "thus value has to be worked out by taking into account cost of raw material, labour charges and any other profit earned by the processor. Again, if we may say so, the observation is sought to be read out of context. In para 8 of the judgment it was clearly held that the value of the entire raw material used has to be taken into consideration and the element of profit/conversion charges has to be added to the element of the value of raw material used. In that case, the appellant was manufacturing points and crossings on behalf of the Railways on job work basis using the raw materials supplied by the Railways. The manufacture of points and crossings generated waste/scrap to the extent of 5% which used to be sold off instead of being returned to the Railways. The point for consideration was whether in computing the value of points and crossings, the value of scrap had to be added.

19. Shri V. Lakshmikumaran submitted that the Tribunal has consistently taken the view that 10% of the cost of manufacture which represents the profit element of the principal manufacturer under Rule 8 of the Valuation Rules - where goods are not sold by him - is not includible in the assessable value of the final product. In this connection, apart from Bhilwara Processors Ltd. v. CCE 2004 (178) ELT 185 which has given rise to this reference, he referred to Mahindra Ugine Steel Co. v. CCE ; Tara Industries Ltd. v. CCE ; Metal Tubes and Rolling Mills v. CCE Brindavan Tex Processors Pvt. Ltd. v. CCE 2006 (204) ELT 121 and Simpson and Co. Ltd. v. CCE, Chennai 2008 (84) RLT 832. Counsel submitted that these decisions of the Tribunal were not challenged by the Revenue and attained finality. The Revenue, cannot pick - and - choose and take a different stance in the instant case. In this regard reference was made to on Steel Authority of India v. CC, Bombay 2000 (115) ELT 42 (SC); CCE, Pune v. Tata Engineering and Locomotives ; Birla Corporation Ltd. v. CCE ; CCE v. Amar Bitumen and Allied Products 2006 (202) ELT 213 (SC); Boving Fouress Ltd. v. CCE, Chennai 2006 (202) ELT 389 (SC); CCE, Chennai-I v. ITC Ltd. 2006 (204) ELT 363 (SC). Counsel also submitted that if profit element of the principal manufacturer is taken into consideration in determining the assessable value of the product, it may result in anomalies.

20. The submissions do not cut any ice. What has to be seen is whether Bhilwara Processors was decided in accordance with the ratio of Ujagar Prints-III. After noticing the decisions in Ujagar Prints-III and Pawan Biscuits Co. (P) Ltd., in a rather brief order, the Tribunal held that it found merit in the submission that assessable value for processed fabric is to be arrived at by adding the processing charges and the processing profit to the cost of grey fabric supplied. Reliance was particularly placed on the observation in Pawan Biscuits Co. (P) Ltd. , quoted hereinabove, that "the cost of raw material supplied by Britannia will have to be included in addition to the appellants manufacturing cost and profit of raw material". We have already dealt with the decision in Pawan Biscuits Co. (P) Ltd. and held that that there was no departure from the legal position settled in Ujagar Prints-III. We have also explained the relevance of the word cost observing that value of an intermediate product when used as raw material, is cost of the raw material but for the purpose of determining its assessable value at the hands of job worker, what is relevant is the value and not cost in the sense of cost of manufacture of that product or raw material. The decision in Bhilwara Processors, if we may say so with respect, was rendered on a mis-reading of the decision in Pawan Biscuits Co. (P) Ltd. which had simply followed Ujagar Prints-III.

21. It is not necessary to separately deal with the other cases cited by Shri V. Lakshmikumaran referred to above, in which similar view as in Bhilwara Processors was taken. Suffice it to observe that any case decided on the premise that cost and not value of the raw material is to be added to the processing charges and expenses plus processors profit, cannot be said to have been decided in accordance with law.

22. It was submitted that manufacturers profit on raw material cannot be included in the value of the raw materials at the hands of the job worker and in this regard reference was made to CCE v. Testles Ltd. ; Navgujarat Packaging Pvt. Ltd. v. CCE ; Kosan Industries Ltd. v. CCE ; CCE v. Special Prints Ltd. 1997 (95) ELT 664; Ganson Ltd. v. CCE 1999 (99) ELT 238 and BIL Industries Ltd. v. CCE . Reference was also made to Brij Bhushan Lal Paduman Kumar v. CIT , in support of the submission that no profit element is involved where raw material is supplied free of cost. It was also submitted that if the demand is confirmed in the instant case, it would result in discrimination as in all other similar cases demand has been dropped holding that notional profit of 10% or 15% under Rule 8 of the Valuation Rules is not includible in the hands of job worker. In this connection, reference was made to Steel Authority of India v. CC, Bombay 2000 (115) ELT 42 (SC); CCE, Pune v. Tata Engineering and Locomotives ; Birla Corporation Ltd. v. CCE ; CCE v. Amar Bitumen and Allied Products 2006 (202) ELT 213 (SC); Boving Fouress Ltd. v. CCE Chennai, 2006 (202) ELT 389 (SC); and CCE, Chennai v. ITC Ltd. 2006 (204) ELT 363 (SC).

23. At this stage, the scheme of law of central excise on the point of valuation may briefly be noticed. The basic rule of valuation of excisable goods is the ad valorem rule as laid down in Clause (a) of Section 4(1) of thein terms of which assessable value is the transaction value of the goods where the goods are ordinarily sold for delivery at the time and place of removal, and buyer is not a related person and price is the sole consideration for the sale. Transaction value has been defined in Section 4(3)(d) to mean the price actually paid or payable for the goods when sold. However, where goods are not sold and the normal price of the goods is not ascertainable, the nearest ascertainable equivalent price has to be determined in such manner as may be prescribed -- as laid down in Clause (b) of Section 4(1) of the. For dealing with cases covered by Section 4(1)(b), the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000 i.e Excise Valuation Rules have been framed. Rules 4 to 11 of the said Rules provide the formulae for arriving at the value of the goods in different situations when value cannot be determined under Section 4(1)(a), that is, where no sale is involved or sale is through a related person etc. Rule 11 is the residuary rule. As observed by the Supreme Court in CCE, Pune v. Dai Ichi Karkaria , the underlying of an object of the rules is to arrive at a value which would be closest to the transaction value of the goods, had the goods been sold in the circumstances mentioned in Section 4(1)(a) of the. It would be appropriate to extract the relevant passage as under:

Section 4(b) deals with the valuation of excisable goods which are chargeable to excise duty with reference to their value. The valuation is to be based ordinarily on the price thereof, that is to say the price at which the excisable goods are ordinarily sold by the manufacturer to a buyer. It is only when the valuation cannot be so made that the closest equivalent thereof has to be determined in the manner prescribed under the Valuation Rules.

24. For example, Rule 8 of the Valuation Rules contains the formula for determining the value of the goods which are not sold by the assessee, but are used for consumption either himself, or on his behalf, in the manufacture of some other goods. Such value as per Rule 8 shall be 110% of the cost of production or manufacture of such goods. The logic behind adopting 110% of the cost of production as deemed value apparently is that had the goods been sold in the market, and not given for any job work, the manufacturer would have quoted a higher price over and above the cost of production to cover his profit etc.

25. As regards value of the goods returned by job worker to the principal, after completing the job, there being no sale involved again, the value cannot be determined under Section 4(1)(a). Rule 8 cannot be applied at that stage for the simple reason that the goods are no more to be consumed for manufacture of some other goods. They are ready-for-sale goods. There being no separate specific rule regarding the valuation of goods cleared or returned by the job worker to the principal, it would follow that the residuary provision contained in Rule 11 will have to be applied. Rule 11 lays down:

If the value of an excisable goods cannot be determined under the foregoing rules, the value shall be determined using reasonable means consistent with the principles and general provisions of these rules and Sub-section (1) of Section 4 of the. :

26. As a matter of fact, the Valuation Rules did not contain any specific provision to deal with the valuation of goods returned by job worker to the principal until March, 2007 when Rule 10A was inserted. It was for this reason, absence of any specific provision regarding valuation of goods cleared by job worker to the principal, that the question as to valuation remained in contention until the law finally came to be settled in Ujagar Prints-III. However, in fairness to the appellant, we do not wish to for-close the issue giving reference to Ujagar Print-III alone. We may make brief comments on the interpretation of Rule 11 which was subject of lengthy discussion at the time of hearing of these appeals. But before we do that, we may again clarify that while Rule 8 is generally applicable to non-sale transactions, it cannot be applied at the stage of clearance of the goods by the job workers to the principal for the reason that at that stage there is no further consumption of the goods as a raw material either by himself or on his behalf for production of some other goods. But it does not mean that the basic principle governing the determination of value under Rule 8 is to be given a go-bye. The words "using reasonable means consistent with the principles and general provisions of these rules" occurring in Rule 11 clearly indicate the relevance of the provisions of Rule 8. Indeed, the provisions and the principle involved are the guiding factors for determining the assessable value of the goods under Rule 11.

27. It is always to be kept in mind that Rule 8 speaks about the value of the goods as being 110% of the cost of production or manufacture. There was a small debate as to whether the additional 10% of the cost of production or manufacture represents only the profit element or something more. The Tribunal, we are afraid, is not competent to make any probe as to what additional 10% stands for. All that we know is that the value of the goods has been statutorily fixed at 110% of the cost of production or manufacture. Shri Lakshmikumaran fairly stated that whether the profit margin is fixed statutorily or left to the manufacturer to be fixed, will make no difference. As a matter of fact, manufacturers profit has always been taken to be the part of the value of the goods. If at the stage of giving the goods to the job worker, the value of the goods includes the element of profit - being 10% of the cost, on which duty is paid by the principal manufacturer and credit is taken by the job worker, we see no reason why at the stage of clearance of final product/finished product, the said element would not be taken into account. In fairness we may note that in support of the contention that profit on raw material cannot be included in the assessable value of the final product, reference was made to Customs Valuation Rules, the Commentary on GATT, Customs Valuation Code by Saul L. Sherman and also Cost Accounting Standard (CAS-4). It was also submitted that if profit is included, it will give rise to several anomalies. We find no substance in any of these submissions. We are of the view that the statutorily determined value under Rule 8 would apply at all stages and for all purposes whenever the question of ascertaining the value of goods in non-sale transactions arises.

28. We are not able to appreciate as to how having taken credit of the duty paid on chassis on the basis of 110% of the cost of production/manufacture, Bhagirath would not include the additional 10% of cost in the assessable value of the vehicle, particularly when in respect of other goods procured directly by them on the account of Eicher, used as raw material, their transaction value is taken into account and credit is taken of the duty paid on those goods.

29. In the above premises, we conclude that the value of chassis for the purpose of arriving at the assessable value of the complete motor vehicle shall be the assessable value of the chassis worked out by Eicher under Rule 8 of the Excise Valuation Rules, and not its actual cost. The questions framed in the order of reference are accordingly answered in favour of the Revenue and against the assessee-appellant.

30. The appeals may now be listed before the Division Bench for final disposal according to law.

(Pronounced in the open court on 6th day of June, 2008)