Factory-gate sale price governs valuation of captively consumed goods when identical goods are sold to unrelated buyers.

Where an assessee sells the same goods to unrelated buyers at the factory gate, that transaction price is the normal price for valuation of captively consumed goods. The Supreme Court noted that the assessee had produced evidence of such independent sales of grey textured yarn, so the captively consumed quantity used in the manufacture of dyed yarn was correctly valued on that basis. The Tribunal's finding that there was no undervaluation was supported by the record and disclosed no error calling for interference. The Revenue's challenge to the valuation method therefore failed.

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Issues: Whether the assessable value of grey textured yarn captively consumed in the manufacture of dyed yarn was required to be determined on the basis of the price at which the assessee sold the same goods to unrelated wholesale buyers at the factory gate.

Analysis: The assessee produced evidence of sales of the grey textured yarn to independent purchasers at the factory gate. Where such sales to unrelated buyers are available, that price constitutes the normal price for valuation of the goods, and the captively consumed quantity is to be valued on that basis. The Tribunal's finding that the assessee was not undervaluing the captively consumed goods was based on the record and did not disclose any error warranting interference.

Conclusion: The captively consumed grey yarn was rightly valued on the basis of the factory-gate sale price to unrelated buyers, and the Revenue's challenge failed.

Ratio Decidendi: When the assessee sells the same goods to unrelated buyers at the factory gate, that sale price is the normal price for valuing captively consumed goods.

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