Valuation of captive consumption: profit must reflect the relevant period's normal earning, not prior-year balance sheet figures.

For captively consumed goods valued under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, the profit element must reflect the normal profit attributable to the relevant period, not the profit shown in the previous year's balance sheet. The Tribunal noted that the assessee had added 10% notional profit to cost, while the demand was computed by applying 17.46% from the prior year. Relying on the Larger Bench view, it held that only the profit ordinarily earned on sale of such goods during the assessment period is relevant; the Board circular cited by the Revenue had already been considered in that precedent. The 17.46% addition was therefore unsustainable and the demand failed.

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Issues: Whether, for valuation of captively consumed goods under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, the profit element had to be taken from the previous year's balance sheet or from the normal profit actually attributable to the relevant period.

Analysis: The goods were captively consumed and the appellant had been adding notional profit at 10% to the cost. The demand was raised by applying 17.46% profit shown in the previous year's balance sheet. The Tribunal noted that the relevant period showed only 0.32% profit and relied on the Larger Bench view that, for captively consumed goods, the profit to be included is the profit that would normally be earned on sale of such goods under assessment. The Board circular relied upon by the Revenue had already been considered in that precedent.

Conclusion: The addition of 17.46% profit from the previous year was not sustainable and the demand failed.

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