Captively Consumed Goods Valuation: Comparable-goods method applies, and cost-of-production is used only if that method is unavailable.

Section 35E review directions must be issued within one year of the order sought to be reviewed, and a limitation objection fails where the record does not show that the direction was made beyond that period. For captively consumed goods, valuation does not proceed by reference to a sale price under Section 4(1)(a); it is determined under Section 4(1)(b) and the valuation rules. Where comparable goods are available, Rule 6(b)(1) applies on that basis, and the cost-of-production method under Rule 6(b)(2) is used only if comparable-goods valuation is unavailable. The higher price charged to another class of buyers was therefore not decisive, and no deduction of profit was warranted.

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Issues: (i) Whether the departmental direction under Section 35E was barred by limitation; and (ii) whether the value of captively consumed goods had to be determined by adopting the price charged to one class of buyers and by deducting profit from the assessable value.

Issue (i): Whether the departmental direction under Section 35E was barred by limitation.

Analysis: Section 35E(3) prohibits passing of a review direction after expiry of one year from the date of the order sought to be reviewed. The record did not show that the direction was made beyond that statutory period, and the objection proceeded on an incorrect premise as to the relevant date of communication.

Conclusion: The limitation objection failed and the departmental application was maintainable.

Issue (ii): Whether the value of captively consumed goods had to be determined by adopting the price charged to one class of buyers and by deducting profit from the assessable value.

Analysis: For captively consumed goods there is no sale price under Section 4(1)(a); valuation is to be done under Section 4(1)(b) by applying the valuation rules. Rule 6(b)(1) permits valuation on the basis of comparable goods sold by the manufacturer or any other assessee. The higher price charged to a different class of buyers was therefore not determinative, and Rule 6(b)(2), which relates to cost of production where sub-rule (1) does not apply, had no application once comparable-goods valuation was adopted.

Conclusion: The valuation adopted below was upheld and no deduction of profit was warranted.

Final Conclusion: The challenge to the valuation order failed on both limitation and merits, and the assessment as sustained by the departmental authorities remained undisturbed.

Ratio Decidendi: Captively consumed goods are not valued by reference to a sale price under Section 4(1)(a); where comparable goods exist, valuation must proceed under the relevant valuation rule on that basis, and the cost-of-production method applies only if the comparable-goods method is unavailable.

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