Valuation of captively consumed rectified spirit may use sale price of similar goods under reversal rules.

Rule 57CC and Rule 57AD were applied to determine the amount payable on captively consumed rectified spirit used in manufacturing country liquor. The relevant valuation could be based on the sale price of ethyl alcohol of the same class or group cleared at the factory gate, because the rule referred to goods of the same class or group rather than an identical item. The absence of a separate sale price for the captively consumed quantity did not defeat the computation, and the objection that no sale was involved was rejected on the facts. The respondent was therefore treated as having correctly discharged the amount payable, and the revenue's challenge failed.

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Issues: Whether the respondent was required to reverse proportionate credit by paying an amount equivalent to 8% of the value of rectified spirit captively consumed in the manufacture of country liquor, and whether the sale price of ethyl alcohol of the same class or group could be taken for that purpose.

Analysis: The dispute turned on the applicability of the reversal mechanism under Rule 57CC and Rule 57AD. The lower appellate authority had found that the respondent had cleared and sold ethyl alcohol of the same class, and that the expression used in the rule referred to goods of the same class or group and not to a narrowly identical item. On that basis, the absence of a separate sale price for the captively consumed quantity did not defeat the valuation exercise. The reasoning further held that Rule 57AD(2B) could be applied by reference to the sale price of similar goods cleared at the factory gate, and that the department's objection that no sale was involved was not sustainable on the facts.

Conclusion: The respondent had correctly discharged the amount payable on the captively consumed rectified spirit, and the revenue's challenge failed.

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