Valuation of captively consumed goods under excise rules: comparable goods method applied earlier, cost-based rule applied later.

Valuation of captively consumed excisable goods depended on the applicable regime. For the period before 01.07.2000, where the goods were also sold in the market and no evidence showed that the captive-clearance goods were of inferior quality, valuation had to follow the comparable goods method under Rule 6(b)(i) read with Section 4 of the Central Excise Act, 1944. For the period after 01.07.2000, Rule 8 required valuation at 110% or 115% of cost of production, and the lower authorities' rejection of a lower-value certificate was not supported by contrary material. The valuation adopted below was upheld, and the demand, interest, and penalty were sustained.

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Issues: Whether the valuation of goods captively consumed for further manufacture was to be determined, for the period prior to 01.07.2000, under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 read with Section 4 of the Central Excise Act, 1944, and, for the period after 01.07.2000, under Rule 8 of the Central Excise Valuation (Determination of Price of Excisable Goods) Rules, 2000.

Analysis: For the earlier period, the goods were captively consumed and also sold outside. No evidence was produced to show that the goods used captively were of substandard or inferior quality. In that situation, valuation was required to follow the comparable goods method under Rule 6(b)(i) read with Section 4 of the Central Excise Act, 1944. For the later period, Rule 8 required valuation on the basis of 110% or 115% of the cost of production. The certificate produced to support a lower value was rejected by the lower authorities, and that rejection was not effectively disputed by any supporting material.

Conclusion: The valuation adopted by the lower authorities was upheld for both periods, and the demand, interest, and penalty were sustained.

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