Captive consumption valuation under Section 4(1)(a) prevails over comparable-goods method where transaction value is available.

Where transaction value under Section 4(1)(a) was available for captively consumed goods, valuation could not be shifted to the comparable-goods mechanism under Rule 6(b)(ii); the price under Section 4(1)(a) had to be used for those goods. For the remaining goods, valuation under Rule 6(b)(ii) on actual profit was accepted, but the extended limitation period was unavailable because there was no suppression or intent to evade duty, especially where a similar margin had earlier been accepted and credit would remain available within the assessee's own factory. The demand was therefore confined to the normal period, and consequential interest under Section 11AB could not be levied.

---

---

Issues: (i) Whether the value of captively consumed goods was required to be determined under the value available under Section 4(1)(a) or under Rule 6(b)(ii); (ii) Whether the demand for the extended period of limitation, interest under Section 11AB, and the consequential penalty could be sustained.

Issue (i): Whether the value of captively consumed goods was required to be determined under the value available under Section 4(1)(a) or under Rule 6(b)(ii).

Analysis: Rule 6(b)(ii) applies to captively consumed goods only where valuation on the basis of comparable goods is not possible. The valuation scheme is intended to approximate as closely as possible the value under Section 4(1)(a). Where the price under Section 4(1)(a) is available, recourse to comparable goods under Rule 6(b) does not arise.

Conclusion: The value was correctly required to be determined under Section 4(1)(a), and not under Rule 6(b)(ii), in respect of goods for which such price was available.

Issue (ii): Whether the demand for the extended period of limitation, interest under Section 11AB, and the consequential penalty could be sustained.

Analysis: For the remaining goods, valuation was to be made under Rule 6(b)(ii) on the basis of actual profit. However, the extended period was not available because the department had previously accepted a similar 10% margin for clearances from the same factory and because there was no motive to evade duty where the credit would be available in the assessee's own factory. In the absence of suppression or intent to evade, the demand was confined to the normal period. Once the demand was so confined, Section 11AB could not be invoked.

Conclusion: The extended period of limitation was not available, interest under Section 11AB could not be levied, and the matter required remand only for recomputation of duty and penalty for the normal period.

Final Conclusion: The impugned order was set aside and the appeal succeeded, with valuation principles affirmed in part but the demand restricted to the normal period and the matter remitted for fresh quantification.

Ratio Decidendi: Where the transaction value under Section 4(1)(a) is available for captively consumed goods, valuation under the comparable-goods mechanism of Rule 6(b) is not attracted; and absent suppression or intent to evade duty, the extended period and consequential interest cannot be sustained.

---