Duty-paid rejected goods excluded from assessable value; actual interest cost must be used in manufacture computation.

Separately duty-paid broken PCC poles cleared independently could not be loaded again into the assessable value of the finished good poles, because the broken poles had already suffered duty on their own clearance. The cost of manufacture also had to be computed using the actual interest cost for the relevant period, rather than substituting an earlier figure. On both issues, the computation adopted by the assessee was accepted and the contrary adjustment was disallowed.

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Issues: (i) Whether the cost of broken PCC poles, cleared on payment of duty, was includible in the assessable value of the good poles; (ii) whether the actual interest cost for the relevant period was to be adopted for computing the cost of manufacture.

Issue (i): Whether the cost of broken PCC poles, cleared on payment of duty, was includible in the assessable value of the good poles.

Analysis: The broken poles arose during testing and were themselves cleared on payment of duty under Heading 6807 on the value approved by the Department. Since duty was paid on the broken poles separately, their cost could not again be loaded into the manufacturing cost of the good poles.

Conclusion: The cost of broken poles was not includible in the assessable value of the good poles, in favour of the assessee.

Issue (ii): Whether the actual interest cost for the relevant period was to be adopted for computing the cost of manufacture.

Analysis: The relevant calculation had to be based on the actual interest paid during the period under consideration. The material on record included a separate calculation sheet showing the interest charges for the relevant period, and there was no basis to substitute an earlier period's interest figure.

Conclusion: The actual interest cost for the relevant period was required to be taken into account, in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal succeeded on both issues.

Ratio Decidendi: Where a separately duty-paid broken product is cleared independently, its cost cannot be included again in the assessable value of the finished product, and cost of manufacture must be computed on the actual interest cost of the relevant period.

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