Captive consumption valuation must follow comparable price where available; penalty not justified in an interpretational dispute.

Captive consumption of components in the assessee's own units had to be valued under the comparable-price method where such market price was available, because Rule 6(b)(i) applied before the cost-based method under Rule 6(b)(ii). As the same components were also sold as spare parts, comparable price existed, but the record needed limited factual verification on whether the department relied on the dealers' list price or the assessable value in the spare-parts market. Given the interpretational nature of the dispute, the penalty was not sustainable and was set aside.

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Issues: Whether the assessable value of components captively consumed in another unit had to be determined on the basis of comparable price under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975, and whether the penalty imposed was sustainable.

Analysis: The components removed to the assessee's own units constituted captive consumption. For goods so consumed, Rule 6(b)(i) required valuation on the basis of comparable price where such price was available, and the cost-based method under Rule 6(b)(ii) applied only when no comparable price existed. Since the same components were also being sold as spare parts in the market, comparable price was available. The matter nevertheless required factual verification as to whether the department had adopted the dealers' list price or the assessee's assessable value in the spare parts market. In view of the interpretational nature of the dispute, the penalty was not justified.

Conclusion: The valuation had to be tested under the comparable-price method, the issue was remanded for limited factual examination, and the penalty was set aside.

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