Best-judgment valuation under excise rules applied where turnkey-project goods were not comparable with ordinary sale-price goods.

For parts of fire protection systems manufactured on site for turnkey projects, valuation could not be fixed under the ordinary sale-price rule because goods sold in loose form to independent buyers were not comparable with goods deployed in third-party projects. The captive-use provision also did not apply, as the goods were not consumed by the assessee itself. Where normal price under section 4 was not ascertainable, the residual best-judgment method under Rule 7 of the Central Excise (Valuation) Rules, 1975 governed the pre-1 July 2000 period. The lower authority's reliance on a precedent later disapproved by the Supreme Court was therefore unsustainable, and the valuation for that period was set aside.

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Issues: Whether the demand of duty on parts of fire protection systems manufactured on site for turnkey projects was correctly valued by applying the erstwhile Central Excise (Valuation) Rules, 1975, and whether the matter for the period prior to 1 July 2000 was governed by Rule 7 of those Rules.

Analysis: The dispute related to valuation of goods used in turnkey projects for the period before 1 July 2000. The earlier basis adopted by the lower authority rested on a precedent that had since been disapproved by the Supreme Court. The applicable valuation framework required recourse to the valuation rules only where normal price under section 4 was not ascertainable. Rule 4 was held inapplicable because the goods sold in loose form to independent buyers were not the same as the goods used in turnkey projects. Since the goods were not consumed by the assessee itself but deployed in third-party projects, Rule 6(b) also did not fit the factual situation. The proper course was best judgment valuation under Rule 7, and the costing data submitted by the assessee had in substance been accepted in the assessment exercise.

Conclusion: The impugned order was unsustainable to the extent it upheld the demand for the period prior to 1 July 2000, and the appeal succeeded for that period.

Final Conclusion: The valuation adopted by the lower authority was set aside for the pre-1 July 2000 period, resulting in partial relief to the assessee.

Ratio Decidendi: Where goods manufactured for turnkey projects are not comparable with goods sold in the ordinary course, and normal price is not ascertainable, valuation must be determined under the residual best judgment rule rather than by applying the normal sale-price rule or an inapposite captive-use provision.

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