Excise valuation of marketable goods permits notional profit inclusion even when captive consumption is by the buyer.

PCC poles used by an electricity board were treated as marketable goods for excise valuation, and assessable value was required to be determined under Rule 7 read with Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 on cost of production plus profit, if any, normally earned on sale. The fact that the poles were consumed captively by the buyer did not exclude a notional profit element where the goods were capable of sale. On the facts noted, a 10% margin of profit adopted by the adjudicating authority was found reasonable, so the inclusion of that margin in assessable value was upheld.

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Issues: Whether PCC poles manufactured by the assessee were liable to be valued by including a notional margin of profit under the Central Excise Valuation Rules, 1975.

Analysis: The valuation of goods was required to be made under Rule 7 of the Central Excise Valuation Rules, 1975 read with Rule 6(b)(ii), which contemplates assessment on the basis of cost of production together with profits, if any, which the assessee would normally earn on sale of such goods. The fact that the electricity board consumed the poles for its own use did not exclude the element of profit for valuation purposes, because PCC poles were marketable and, if sold, would normally carry some margin of profit. The adjudicating authority had adopted a 10% margin of profit, and no material was shown to render that estimate unreasonable.

Conclusion: The inclusion of a 10% margin of profit in the assessable value was upheld and the contention of the assessee was rejected.

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