Captive consumption valuation must reflect normal profit on the goods assessed, not overall manufacturing profits.

For captively consumed goods, assessable value under Rule 6(b)(ii) must include only the normal profit relatable to the goods under assessment, not the overall profit earned from the assessee's other manufactured products. The stated analysis notes that, where cost audit material is undisputed and there is no finding of profit on the goods in question, adding profit from a different manufacturing unit to the value of captively consumed parts is unsustainable. On that basis, the addition to assessable value was not justified and the duty demand, interest, and penalty were said to be quashed in favour of the assessee.

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Issues: Whether, for determining the assessable value of captively consumed goods under Rule 6(b)(ii) of the Central Excise Valuation Rules, the profit to be added is the overall profit earned by the assessee from all manufactured products or only the normal profit attributable to the goods under assessment.

Analysis: The applicable principle is that, in valuing captively consumed goods, the relevant profit component is the profit the assessee would ordinarily earn on sale of the very goods under assessment, and not the profit earned on the finished products manufactured by the assessee. The record also showed no dispute to the cost audit material and no finding that the appellant earned profit on the goods in question. On that basis, addition of the profit margin from the motor cycle unit to the value of the captively consumed parts was unsustainable.

Conclusion: The addition made to the assessable value was not justified and was set aside, with the demand of duty, interest, and penalty being quashed in favour of the assessee.

Ratio Decidendi: For captively consumed goods, assessable value must reflect the normal profit relatable to the goods under assessment, and not the profit from the assessee's overall manufacturing operations.

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