Nearest ascertainable equivalent governs captive goods valuation; highest comparable price cannot be adopted mechanically for excise duty.

For captively consumed excisable goods, valuation must reflect the nearest ascertainable equivalent where normal price is not available, and the highest comparable contractual price cannot be adopted mechanically without a lawful factual basis. The duty demand for April 1999 to December 1999 was unsustainable because the assessee had revised the assessable value on finalised cost data and discharged the differential duty, a contention not dealt with by the adjudicating authority. The demand based on valuation of ethyl alcohol by taking isolated highest prices of comparable manufacturers was also rejected, as it did not satisfy the statutory valuation requirement.

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Issues: (i) Whether the demand for the period April 1999 to December 1999 could be sustained when the assessee had revised the assessable value on the basis of finalised cost data and discharged the differential duty. (ii) Whether the department could determine the assessable value of captively consumed ethyl alcohol by adopting the highest contractual price of comparable goods under Rule 6(b)(i) instead of applying the nearest ascertainable equivalent under Section 4(1)(b) of the Central Excise Act, 1944.

Issue (i): Whether the demand for the period April 1999 to December 1999 could be sustained when the assessee had revised the assessable value on the basis of finalised cost data and discharged the differential duty.

Analysis: The assessee's communication showed that after finalisation of costing for 1998-99, the value of SDS had increased and the differential duty for the relevant period had been debited. The adjudicating authority did not deal with this specific contention. The omission was treated as a serious lapse, and the departmental representative did not dispute the factual position recorded in the communication.

Conclusion: The demand for April 1999 to December 1999 was held unsustainable.

Issue (ii): Whether the department could determine the assessable value of captively consumed ethyl alcohol by adopting the highest contractual price of comparable goods under Rule 6(b)(i) instead of applying the nearest ascertainable equivalent under Section 4(1)(b) of the Central Excise Act, 1944.

Analysis: Section 4(1)(b) requires valuation by the nearest ascertainable equivalent where normal price is not ascertainable. Even under Rule 6(b)(i), the valuation exercise must aim at that nearest equivalent. The department adopted the highest price on isolated dates from comparable manufacturers without examining the contractual terms or explaining why that figure represented the closest equivalent. Such adoption of the highest price did not satisfy the statutory requirement and was not a lawful basis for valuation.

Conclusion: The adoption of the highest contractual price for valuation was rejected and the demand based on that method was held unsustainable.

Final Conclusion: The impugned duty demand and penalty could not be sustained because the valuation method adopted was contrary to law and the specific demand for the later period was also unsupported on the facts.

Ratio Decidendi: For excisable goods not sold in the market, valuation must be fixed as the nearest ascertainable equivalent under Section 4(1)(b), and the highest price of comparable goods cannot be mechanically adopted without a lawful basis and proper examination of relevant facts.

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