Captive consumption valuation must reflect product-specific profit, not overall corporate profit, for lead and zinc concentrate.

For captively consumed lead and zinc concentrate, valuation under the cost of production method required the profit element to be linked to the relevant product division, not to overall corporate or projected profit. An unrelated balance-sheet profit could not be added where the assessee was a multi-product entity and the profit attributable to the goods concerned was the proper basis. On the facts, the assessee's accounts showed losses for the relevant year, and the proposed uniform notional profit addition was not supported. The lower authorities' valuation was therefore sustained in favour of the assessee.

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Issues: Whether, for valuation of captively consumed lead and zinc concentrate, the assessable value was required to be enhanced by adding notional profit based on the overall corporate profit or projected profit, and whether the valuation had to be determined by taking only the profit relatable to the relevant product division.

Analysis: The dispute turned on application of the cost of production method for captively consumed goods. The record showed that the department had sought to rely on the assessee's overall balance-sheet profit, while the valuation in question had to reflect the profit element relatable to the relevant goods and not to the profits of other products or divisions. The earlier Tribunal decision relied upon had already accepted that, where a multi-product assessee clears goods for captive consumption, the profit element must be linked to the product or division concerned and the inclusion of an unrelated overall profit figure is not justified. On the facts, the assessee's accounts also showed losses for the relevant year, and the attempted addition of a uniform notional profit was not supported.

Conclusion: The addition of notional profit on the basis of overall corporate profit was not warranted, and the valuation made by the lower authorities was sustained in favour of the assessee.

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