Captive consumption valuation must use proper cost data, with audited annual figures considered for fresh determination and remand.

Captively consumed intermediate goods are to be valued on cost of production plus profit under Rule 6(b)(ii), and audited annual cost data may be preferred where it better reflects production cost than monthly figures. The valuation for the relevant period was sent back for fresh determination on that basis, with the assessee to be heard. The demand for April to June 2000 also required reconsideration because the assessment for that period had reportedly been finalised later, and the penalties were set aside pending fresh decision. The matter was remanded for reconsideration of valuation, the disputed demand period, and penalties.

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Issues: (i) Whether the assessable value of captively consumed intermediate goods was to be determined on the basis of audited annual cost data rather than monthly cost data under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975. (ii) Whether the demand for April to June 2000 required reconsideration in view of the finalisation of assessment for that period and the penalties could be sustained.

Issue (i): Whether the assessable value of captively consumed intermediate goods was to be determined on the basis of audited annual cost data rather than monthly cost data under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975.

Analysis: The assessable value of captively consumed intermediate goods had to be determined on the basis of cost of production plus profit. Since cost of production varied with production volume and the audited cost data for the relevant financial year was available, the monthly cost basis adopted in the impugned order did not adequately reflect the proper valuation method. The matter therefore required reconsideration on the basis of the audited data and after giving the appellant an opportunity of hearing.

Conclusion: The valuation issue was remanded for fresh determination on the basis of audited cost data under Rule 6(b)(ii).

Issue (ii): Whether the demand for April to June 2000 required reconsideration in view of the finalisation of assessment for that period and the penalties could be sustained.

Analysis: The demand relating to April, May and June 2000 had to be examined afresh because the assessment for that period was stated to have been finalised by a later order. If duty had already been paid in accordance with the final assessment, the demand for that period was not to survive in the present proceedings. As the matter was being remanded, the penalties also could not be sustained at that stage and were set aside for fresh decision.

Conclusion: The demand for April to June 2000 was directed to be reconsidered and the penalties were set aside.

Final Conclusion: The order was set aside and the matter was sent back for fresh adjudication on valuation, the disputed period demand, and penalties.

Ratio Decidendi: For captively consumed goods, assessable value must be determined on the legally relevant cost of production basis, and where audited yearly data is available it should be considered for fresh determination rather than relying only on monthly figures.

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