Captive consumption valuation requires true comparable goods first; absent that, cost-based valuation with normal profit applies.

Liquid chlorine and dry chlorine, though classified under the same tariff heading, were not comparable goods for central excise valuation because tariff classification alone did not establish valuation comparability and the two forms were treated differently for tariff value purposes. For captively consumed dry chlorine, valuation had first to be attempted under Rule 6(b)(i) on the basis of comparable goods; as no true comparable was shown, the residual cost-based method under Rule 6(b)(ii), including normal profit, had to apply. The valuation based on liquid chlorine's sale price was therefore unsustainable and the assessable value was remitted for fresh determination on the cost method.

---

---

Issues: (i) Whether Liquid Chlorine and Dry Chlorine are comparable goods for valuation purposes under the central excise valuation scheme. (ii) Whether the assessable value of Dry Chlorine captively consumed in the factory was to be determined under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 or, failing that, under Rule 6(b)(ii) of those Rules.

Issue (i): Whether Liquid Chlorine and Dry Chlorine are comparable goods for valuation purposes under the central excise valuation scheme.

Analysis: Chlorine, whether in liquid or gaseous form, fell under the same tariff heading for classification, but classification did not by itself establish comparability for valuation. The separate tariff values earlier fixed for Liquid Chlorine and Dry Chlorine showed that the two forms were treated differently for valuation purposes. Dry Chlorine, at the point of captive consumption, was in gaseous form, while the value relied upon by the lower authorities was the sale value of Liquid Chlorine. The two were therefore not comparable goods for excise valuation.

Conclusion: Liquid Chlorine and Dry Chlorine are not comparable goods for valuation, and the finding to the contrary was against the assessee.

Issue (ii): Whether the assessable value of Dry Chlorine captively consumed in the factory was to be determined under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 or, failing that, under Rule 6(b)(ii) of those Rules.

Analysis: Where excisable goods are not sold but are captively consumed, valuation must first be attempted on the basis of comparable goods under Rule 6(b)(i). Since no comparable goods for Dry Chlorine were shown to exist, that method could not be applied. The proper method was therefore the residual method under Rule 6(b)(ii), namely cost of production or manufacture including normal profit. The value fixed by the lower authorities on the basis of the higher sale price of Liquid Chlorine was accordingly unsustainable.

Conclusion: Rule 6(b)(i) was inapplicable and the assessable value had to be re-determined under Rule 6(b)(ii), in favour of the assessee.

Final Conclusion: The valuation adopted by the lower authorities was set aside, and the matter was sent back for fresh determination of the assessable value of captively consumed Dry Chlorine on the cost-based method after giving the assessee an opportunity to produce materials and be heard.

Ratio Decidendi: For captively consumed excisable goods, valuation must be based first on comparable goods, and if no true comparable exists, on the cost of production including normal profit; a different form of the same commodity used at the point of captive consumption is not necessarily a comparable good for valuation merely because it falls under the same tariff heading.

---