Marketable captively consumed goods may include reasonable notional profit in assessable value under cost-based excise valuation.

Captively consumed Head Blocks, being marketable, were required to be valued under Rule 6(b)(ii) of the Valuation Rules, 1975 read with section 4(1)(b) of the Central Excises & Salt Act. The Tribunal accepted that once marketability was established, assessable value could be based on cost plus a reasonable notional profit element, even though the goods were not actually sold. The Department's addition of profit to the cost price was upheld because the adopted percentage was found reasonable in light of the goods' nexus with the manufacture of finished products.

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Issues: Whether notional profit could be added to the cost price of Head Blocks captively consumed for valuation under the excise valuation rules.

Analysis: The Tribunal proceeded on the footing that the Head Blocks were marketable, the question of marketability having already been decided in the appellants' own case. Once marketability was accepted, valuation had to be worked out on the basis prescribed by Rule 6(b)(ii) of the Valuation Rules, 1975 read with Section 4(1)(b) of the Central Excises & Salt Act. The Tribunal held that the Department was justified in adding a profit element to the cost price, since the goods, though not sold as such, would have earned profit if sold, and the percentage adopted was considered reasonable having regard to their nexus with the manufacture of the finished goods.

Conclusion: Notional profit was rightly added to the cost price for valuation of the captively consumed Head Blocks, and the assessee's challenge failed.

Ratio Decidendi: Where captively consumed goods are marketable, their assessable value may include a reasonable notional profit under the prescribed cost-based valuation method even if the goods are not actually sold.

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