Captive consumption valuation must use normal sale profit, not overall manufacturer profit, and disclosed facts defeat extended limitation.

In valuation of captively consumed goods under Rule 6(b)(2) of the Central Excise Valuation Rules, 1975, assessable value is confined to the profit normally earned on sale of such goods, not the manufacturer's overall profit or loss. Where the assessee has disclosed cost and sale price in the declaration and those particulars are not shown false, suppression of facts is absent and the extended limitation period is not available. The note states that these principles made the demand unsustainable both on limitation and on merits.

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Issues: (i) Whether the demand was barred by limitation in the absence of suppression of facts; (ii) whether, for valuation of captively consumed goods, the profit of the entire manufacturer could be included instead of the profit normally earned on sale of such goods.

Issue (i): Whether the demand was barred by limitation in the absence of suppression of facts.

Analysis: The appellant had disclosed both the cost of production and the sale price in the declaration. Those particulars were not shown to be false. On the record, the case did not involve suppression of material facts, and the declared values were close to the cost figures. The basis for invoking the extended period was therefore not made out.

Conclusion: The limitation objection succeeded in favour of the assessee.

Issue (ii): Whether, for valuation of captively consumed goods, the profit of the entire manufacturer could be included instead of the profit normally earned on sale of such goods.

Analysis: Rule 6(b)(2) of the Central Excise Valuation Rules, 1975 requires only the profit, if any, that would have normally been earned on the sale of such goods. The rule does not permit adoption of the overall profit or loss of the manufacturer. For a captively consumed item, valuation must be confined to the profit relatable to the goods themselves, not the enterprise as a whole.

Conclusion: The valuation adopted by including the manufacturer's overall profit was unsustainable and the assessee's contention was accepted.

Final Conclusion: The impugned demand could not be sustained either on limitation or on merits, and the assessee obtained complete relief.

Ratio Decidendi: For captively consumed goods, assessable value must be based on the profit normally earned on sale of such goods, and not on the overall profitability of the manufacturer; where the assessee has disclosed the relevant facts, the extended period of limitation is unavailable in the absence of suppression.

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