Comparable goods valuation allows depreciation for used inputs when assessing duty on captive consumption goods.

Rule 6(b)(i) of the Central Excise Valuation Rules, 1975 permits reasonable adjustments when comparable goods are used for valuation, and used goods cannot be treated as equivalent to new goods without accounting for depreciation. Applying that principle, depreciation was admissible in valuing stator wounds manufactured from retrieved and used stator stacks for captive consumption, because the valuation had to reflect the material difference between new and used items. The differential duty demand based on parity with new stator stacks was therefore not sustainable, and the assessee succeeded.

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Issues: Whether, for valuation of stator wounds manufactured out of retrieved and used stator stacks and cleared for captive consumption, depreciation could be allowed while determining assessable value under the comparable goods method.

Analysis: Rule 6(b)(i) of the Central Excise Valuation Rules, 1975 permits reasonable adjustments when the value of comparable goods is adopted. A used item cannot be equated with a new item for valuation purposes, and commercial practice recognises depreciation in valuing used goods. The demand proceeded on the premise that no adjustment was permissible merely because the goods were not sold, but the relevant rule itself authorises reasonable adjustment to reflect material differences between new and used goods.

Conclusion: Depreciation was admissible, and the differential duty demand based on parity between new and retrieved used stator stacks was not sustainable; the appeal succeeded in favour of the assessee.

Ratio Decidendi: When valuation is made on the basis of comparable goods, reasonable adjustments must be allowed to account for material differences such as depreciation in used goods.

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