Captive consumption valuation must include notional profit where goods are marketable and profit is ordinarily earned on sale.

Captively consumed R.C.C. poles were required to be valued under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 on a cost-of-production basis including profit, if any, that the assessee would normally earn on sale of such goods. Because the poles were commercially marketable, a profit element was properly included in the assessable value. The authorities adopted a 10% notional profit margin, and no material was produced to show that the estimate was excessive or unreasonable. The inclusion of notional profit in the assessable value was therefore upheld.

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Issues: Whether the assessable value of R.C.C. poles captively consumed by the assessee was required to include notional profit under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975.

Analysis: Valuation of excisable goods captively consumed was governed by Rule 6(b). Under sub-clause (ii), the value had to be based on the cost of production including profits, if any, which the assessee would normally earn on sale of such goods. The goods were commercially marketable, and on a sale basis there would ordinarily be some margin of profit. The authorities fixed the profit element at 10%, and no material was shown to establish that the estimate was excessive or unreasonable.

Conclusion: The inclusion of notional profit in the assessable value was upheld and the challenge failed.

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