Caprolactum recovery not manufacture, so no duty and no margin-of-profit addition in valuation.

Recovery of caprolactum did not amount to manufacture, so the product was not excisable or dutiable. Because duty itself was not attracted, no valuation adjustment by adding margin of profit under Rule 6(b)(2) of the Central Excise Valuation Rules could arise. The appellate order was therefore free from infirmity, and the assessee succeeded on the valuation issue as well as on the underlying duty question.

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Issues: Whether the recovery of caprolactum amounted to manufacture and was dutiable, and consequently whether margin of profit could be added in determining assessable value under the valuation rules.

Analysis: The Tribunal had already held in the earlier order that recovery of caprolactum did not amount to manufacture and, therefore, the product was not liable to duty. Once the goods themselves were held not to be dutiable, no question arose of adding any margin of profit for valuation under Rule 6(b)(2) of the Central Excise Valuation Rules. On that basis, the impugned appellate order suffered from no infirmity.

Conclusion: The issue was decided in favour of the assessee. Recovery of caprolactum was not manufacture, the goods were not dutiable, and margin of profit could not be added.

Ratio Decidendi: Where the goods are held not to be excisable or dutiable because their recovery does not amount to manufacture, valuation by adding margin of profit does not arise.

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