Captive consumption valuation must reflect actual normal profit margin, not a mechanical percentage, under Rule 6(b).

Captive consumption under Rule 6(b)(ii) of the Central Excise (Valuation) Rules requires assessable value to be based on cost of production or manufacture plus the profit normally earned on sale of such goods where Rule 6(b)(i) does not apply. The profit element cannot be fixed mechanically at a standard percentage without evidence. The proper valuation must be determined from relevant material, including the assessee's data and necessary enquiries, to ascertain the actual normal margin of profit. Valuation based on adopted percentages was therefore not sustainable and required fresh determination on evidence.

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Issues: Determination of the assessable value of goods captively consumed under Rule 6(b) of the Central Excise (Valuation) Rules, including the proper basis for adding profit margin.

Analysis: Rule 6(b)(ii) requires valuation on the basis of cost of production or manufacture including the profit which the assessee would normally have earned on sale of such goods, where valuation cannot be made under Rule 6(b)(i). The percentage of profit cannot be fixed mechanically at 10% or reduced to 5% without any evidentiary basis. The proper course is to determine the actual margin of profit with reference to relevant data, including information supplied by the assessee and any necessary enquiries. The assessable value must therefore rest on material showing the profit normally earned on sale of such goods.

Conclusion: The valuation could not be sustained on the percentages adopted by the lower authorities, and the matter required fresh determination of the actual margin of profit.

Final Conclusion: The appeal succeeded and the assessment issue was sent back for reconsideration on the basis of evidence relating to the actual profit margin.

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