Captive consumption valuation depends on comparability; wholesale sale price cannot apply without proof of identical goods.

Goods cleared to a sister unit for captive consumption were held not to be comparable with finished goods sold to unrelated buyers because the sister-unit goods underwent further processing. In the absence of departmental verification to prove identity or comparability, the wholesale sale price could not be used for valuation. Cost construction was therefore the proper basis for captive consumption clearances under the applicable excise valuation rule, and the department's challenge to that approach failed.

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Issues: Whether the value of goods cleared to a sister unit for captive consumption could be determined on the basis of the wholesale price of finished goods sold to unrelated buyers, or whether valuation had to be made on cost construction basis under the applicable excise valuation rules.

Analysis: The dispute turned on whether the goods transferred to the Akurdi unit were identical or comparable to the finished goods sold in wholesale trade. The lower appellate authority found that the goods sent to the sister unit underwent further processing at Akurdi and therefore were not comparable to the finished goods sold to dealers. The department did not conduct its own verification to establish comparability or rebut the assessee's case, and the allegation of undervaluation remained unsupported. In such circumstances, the wholesale price under the valuation rule governing sale price was not applicable, and valuation on cost construction basis was appropriate for captive consumption clearances.

Conclusion: The goods cleared for captive consumption were not comparable with the finished goods sold to dealers, and valuation under Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 was correctly applied. The department's appeal was rightly rejected.

Ratio Decidendi: Where the department alleges undervaluation for captive consumption, it must establish comparability of the goods and cannot rely on wholesale sale prices unless the goods are shown to be identical or comparable; absent such proof, cost-based valuation applies.

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