Factory-level costing governs captively consumed goods, requiring reassessment of assessable value and duty on remand.

For captively consumed goods, assessable value under the erstwhile Central Excise valuation rules must be based on the actual cost of production at the factory where the goods are manufactured, with notional profit added thereafter. The cost cannot be computed by combining the costs of all units of the assessee. Where short levy has been worked out on an incorrect costing basis, the valuation and duty liability must be recalculated on remand. The governing principle therefore requires fresh determination of assessable value and any consequential duty demand in accordance with the correct factory-level costing method.

---

---

Issues: Whether the cost of production of captively consumed goods had to be determined on the basis of the actual cost at the factory of production alone, and whether the matter required remand for fresh determination of any short levy of duty.

Analysis: The valuation of captively consumed goods was to be made in accordance with the costing principle under erstwhile Rule 6(b)(ii) of the Central Excise (Valuation) Rules, 1975, as clarified by the governing precedent. The relevant cost had to be confined to the actual cost of production at the factory where the goods were manufactured, and not the combined costs of all units of the assessee. Since the alleged short levy had not been computed on that basis, a fresh determination was necessary. The issue of the exact assessable value, including notional profit, and the consequential short levy had therefore to be reworked in remand proceedings.

Conclusion: The valuation issue was decided against the assessee and the matter was remanded for fresh computation of duty liability, if any, in accordance with the correct costing principle.

Final Conclusion: The revenue's appeals succeeded to the extent that the Tribunal's orders were set aside and the cases were sent back for reconsideration on valuation and consequential duty computation, while other questions were left open.

Ratio Decidendi: For captively consumed goods, assessable value must be determined on the actual cost of production at the manufacturing factory alone, with notional profit added thereafter, before any short levy under the excise law can be ascertained.

---