Captive consumption valuation turns on contemporaneous sale prices where no quantity-based discount arrangement is shown.

For valuation of a captively consumed bulk drug, the relevant price could be taken from contemporaneous sales rather than an earlier lower price based on scattered sales over several years. Because there was no prior contract or established quantity-based discount arrangement showing that the parties contemplated an aggregated supply, each sale had to be assessed on its own terms. The bulk drug being used captively in manufacture of an exempt medicament, valuation fell under Rule 6(1)(b) of the Central Excise Valuation Rules, and the contemporaneous sale prices were properly treated as the correct basis.

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Issues: Whether, for valuation of a captively consumed bulk drug under the valuation rules, the department was bound to adopt an earlier lower sale price based on larger quantities sold over a long period, or could rely on the prices of contemporaneous smaller quantity sales.

Analysis: The bulk drug was used captively in the manufacture of an exempt medicament, so duty valuation had to be determined under Rule 6(1)(b) of the Central Excise Valuation Rules. The claimed lower price from an earlier buyer was based on sales spread over several years, but there was no prior contract or arrangement showing that the seller and buyer contemplated a single aggregated quantity or a quantity-based discount structure. In those circumstances, each actual sale had to be treated on its own terms, and the relevant valuation could properly be based on the prices at which the goods were sold during the period contemporaneous with the captive consumption.

Conclusion: The department correctly adopted the contemporaneous sale prices, and the appellant was not entitled to insist on the earlier lower price.

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