cellaneous Petition No 32937 of 1988
345 IN Writ Petition No 12 183 of 1985
Under Article 32 of the Constitution of India
KK Venugopal Mrs Jayashree Wad and Mrs Aruna Mathur for the Petitioners
K Parasaran Attorney General AK Ganguli P Parmes waran and K Swamy for the Respondents
The following Order of the Court was delivered ORDER In respect of the civil miscellaneous petition for clarification of this Court s 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 whatev er 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 Rs20 and the value of the job work done is Rs5 and the manufacturing profit and expenses for the processing be Rs5 then in such a case the value would be Rs30 being the value of the grey cloth plus the value of the job work done plus manufac turing profit and expenses
That would be the correct as sessable value
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 that 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 processor s factory plus his profit
Rule 174 of the Central Excise Rules 1944 346 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 liabil ities 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 processor s expenses costs and charges plus profit but it is not necessary to include the trader s profits who gets the fabrics processed because those would be post manufacturing profits


Summary:
On a civil miscellaneous petition for clarification of this Court s judgment dated 4th November 1988 the Court
HELD 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
345D E The factory gate means the deemed factory gate as if the processed fabric was sold by the processor
345E 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 that basis
Such a declaration would include only the price or deemed price at which the processed fabric would leave the processor s factory plus his profit
It is necessary to include the processor s expenses costs and charges plus profit but not the trader s profits who gets the fabrics processed because those would be post manufacturing profits
345G H 346B C