Captive consumption valuation rule cannot add notional profit unless the statutory precondition for excisable goods is shown.

Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 applies only where excisable goods are not sold and are used or consumed by or on behalf of the assessee in the manufacture of other articles, with valuation then based on comparable goods or, failing that, cost of production including profit. On the stated facts, imported raw materials were transferred to a sister unit and there was no evidence that they had become excisable goods before transfer or that the statutory precondition for captive-consumption valuation was met. The mere common ownership of the units was insufficient. Accordingly, loading of notional profit was held unjustified and the revenue's valuation approach could not be sustained.

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Issues: Whether loading of notional profit by invoking Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 was justified on the facts of the case.

Analysis: The dispute arose from valuation of goods manufactured for a sister unit, where raw materials were supplied free of cost and the department treated the clearances as inter-unit transfer. The rule invoked applies to excisable goods that are not sold and are used or consumed by or on behalf of the assessee in the production of other articles, with valuation to be based on comparable goods or, failing that, on cost of production or manufacture including profits. On the record, the materials transferred were imported raw materials and there was no evidence that they had been converted into excisable goods before transfer or that the case satisfied the precondition for applying Rule 6(b). The mere fact that the units belonged to the same legal entity did not establish that the appellant was acting as a job worker, but the decisive point remained that the rule governing notional profit on captive consumption of excisable goods was not attracted on the proved facts.

Conclusion: Rule 6(b)(ii) was held inapplicable and the loading of notional profit was unjustified.

Final Conclusion: The valuation adopted by the revenue could not be sustained, and the demand founded on notional profit was set aside in favour of the assessee.

Ratio Decidendi: Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 applies only when excisable goods are not sold and are used or consumed by or on behalf of the assessee in the manufacture of other articles; it cannot be invoked to load notional profit unless that statutory precondition is shown to exist.

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