Captive consumption valuation requires inclusion of notional profit, but only at a 2% margin on cost of production.

For goods manufactured and cleared for captive consumption, notional profit is includible in the assessable value under Rule 6(b) of the Central Excise Valuation Rules, 1975 read with Section 4 of the Central Excise Act, 1944. The valuation dispute was confined to the appropriate profit element, and the Tribunal followed its earlier view that a reasonable margin in the present case was 2% of cost of production rather than 10%. The assessable value was therefore required to include notional profit only at 2% of the cost of production.

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Issues: Whether, for goods manufactured and cleared for captive use, notional profit was required to be added to the assessable value, and if so, whether the addition should be at 10% or 2% of the cost of production.

Analysis: The dispute before the appellate authority was confined to valuation. For goods cleared for captive consumption, notional profit is includible in assessable value under Rule 6(b) of the Central Excise Valuation Rules, 1975 read with Section 4 of the Central Excise Act, 1944. Following the Tribunal's earlier view on a similar issue, the reasonable profit margin in the present case was taken at 2% of the cost of production rather than 10%.

Conclusion: The assessable value had to include notional profit, but only at 2% of the cost of production. The assessee succeeded to that extent.

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