Captive consumption valuation permits notional profit where goods are not sold and comparable goods are unavailable.

Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 applied to yarn captively consumed in the manufacture of unprocessed fabrics because the yarn was not sold and no comparable goods were shown to attract Rule 6(b)(i). Valuation under Rule 6(b)(ii) was to be based on cost of production or manufacture, together with profits the assessee would normally have earned on sale. The provision did not require proof of actual profit and permitted inclusion of notional profit. On that basis, the departmental valuation adding ten per cent notional profit was treated as reasonable.

---

---

Issues: Whether Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975 applied to the valuation of yarn captively consumed in the manufacture of unprocessed fabrics, and whether notional profit could be added while determining such value.

Analysis: The goods were not sold but were used captively in the production of other articles, and no comparable goods were shown to bring the case within Rule 6(b)(i). The valuation therefore fell under Rule 6(b)(ii), which requires valuation on the cost of production or manufacture including profits which the assessee would normally have earned on sale. The provision does not require proof of actual profit; it permits addition of notional profit. The departmental valuation, including ten per cent notional profit, was upheld as reasonable.

Conclusion: Rule 6(b)(ii) applied, and the addition of notional profit in valuing the captively consumed yarn was ; the challenge failed.

---