Captive-consumption valuation may follow independent buyer transaction value where comparable goods are also sold in the market.

Valuation of captively consumed goods is not necessarily confined to cost construction under Rule 8 where comparable goods are also sold to independent buyers. The text states that the valuation rules address different contingencies and need not be applied sequentially in every case, and that a Board clarification issued after the Rule 8 amendment supports adopting a valid transaction value basis. On the facts described, duty was paid using the transaction value of identical goods cleared to independent buyers, and that basis was treated as valid for captive-consumption clearances.

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Issues: Whether goods captively consumed were required to be valued compulsorily on cost construction basis under Rule 8 of the Central Excise Valuation Rules, or whether the transaction value of identical goods cleared to independent buyers could be adopted.

Analysis: The dispute concerned valuation of goods used captively in the manufacture of exempted agricultural equipment, where the assessee had paid duty by adopting the transaction value at which similar goods were sold to independent buyers. The Board's clarification issued after the amendment to Rule 8, together with the legal position that the valuation rules are meant to cover different contingencies and need not be applied sequentially in every case, supported the view that captive consumption does not invariably require cost construction valuation. On the facts, the assessee had used the independent buyer price as the basis for duty payment.

Conclusion: The adoption of transaction value of goods cleared to independent buyers for captive-consumption clearances was held to be valid, and the Revenue's challenge failed.

Ratio Decidendi: Where manufactured goods are partly captively consumed and partly sold to independent buyers, valuation is not mandatorily restricted to cost construction under Rule 8 if the transaction value of comparable independent sales is a valid basis.

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