Costing principles for captively consumed goods must be applied in valuation, with remand for fresh determination.

Correct costing principles under Cost Accounting Standard 4 were required for valuing captively consumed goods cleared as intermediate products to a sister concern. The Tribunal held that the costing methodology could not be treated as prospective only because the standard or circular was issued later, and the adjudicating authority had to apply the correct production-cost principles to the valuation exercise. As the existing determination did not reflect that approach, the valuation was remanded for fresh consideration in accordance with the proper costing principles.

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Issues: Whether the correct costing principles, as reflected in Cost Accounting Standard 4, had to be applied for valuation of captively consumed goods, and whether the valuation order required remand for fresh determination.

Analysis: The valuation dispute turned on the method of arriving at the cost of production for goods cleared to a sister concern as an intermediate product. The Tribunal held that costing principles are not confined to prospective operation merely because the standard or circular came into existence later. The adjudicating authority was required to apply the correct costing principles while determining value, including in respect of earlier production, and the existing determination was therefore not sustainable on that basis.

Conclusion: The valuation matter was remanded to the adjudicating authority for fresh consideration in accordance with the correct costing principles.

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