Captive-consumption valuation: notional profit cannot be added to assessable value unless the valuation rule specifically requires it.

For captive consumption, assessable value of manufactured goods cannot be artificially increased by adding notional profit unless the valuation provision specifically requires it. Applying the Supreme Court principle on captive-use valuation, the Tribunal found no basis to add 10% notional profit to the cost of production for tower components used within the manufacturer's organisation. It also treated the duty paid on the enhanced valuation as having been paid under protest and held that the demand rested on an incorrect basis under Rule 8 read with Rule 9 of the Central Excise Valuation Rules, 2000 and Section 4(1)(b) of the Central Excise Act, 1944, making the refund claim allowable.

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Issues: Whether the assessable value of tower components used by the manufacturer for its own organisation could be enhanced by adding notional profit under the valuation rules, and whether the excise duty paid on such enhanced value was refundable.

Analysis: The valuation of the goods was examined in the light of the binding principle that where goods are manufactured for captive use and are not sold in the market, assessable value cannot be artificially enhanced by adding notional profit unless the governing valuation provision so requires. Applying the ratio of the Supreme Court decision on captive-consumption valuation, the Tribunal held that the facts did not justify addition of 10% notional profit to the cost of production. It further accepted that the duty had been paid under protest and that the impugned demand rested on an incorrect valuation basis under Rule 8 read with Rule 9 of the Central Excise Valuation Rules, 2000 and Section 4(1)(b) of the Central Excise Act, 1944.

Conclusion: The enhancement of assessable value was unsustainable and the refund claim was allowable in favour of the assessee.

Ratio Decidendi: In cases of captive consumption, assessable value cannot be increased by adding notional profit unless the applicable valuation provision validly requires such enhancement.

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