Controlled price cannot value captive consumption; comparable market sales govern excise valuation of molasses.

Captively consumed molasses under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 must be valued by reference to comparable goods manufactured and sold by the assessee or by other assessees. The deeming fiction in proviso (ii) to Section 4(1)(a) applies only where goods are actually sold at a price fixed under law and cannot be extended to captively consumed goods. A controlled price fixed under price-control law therefore cannot be adopted for such captive consumption. The appropriate basis is comparable sales at or about the relevant time, with an average price taken if necessary where sales prices vary.

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Issues: Whether, for captively consumed molasses, valuation under Rule 6(b)(i) of the Central Excise (Valuation) Rules, 1975 could be based on the controlled price fixed under law and deemed to be the normal price under Section 4(1)(a) of the Central Excises Act, 1944, or whether it had to be based on comparable goods sold by the assessee or by other assessees.

Analysis: Rule 6(b)(i) requires valuation of captively consumed goods on the basis of comparable goods manufactured by the assessee or by any other assessee. The deeming fiction in proviso (ii) to Section 4(1)(a) operates only for assessment of duty on goods actually sold at a price fixed under law and cannot be extended beyond the purpose for which it was created. A legal fiction must be confined to its legitimate field and cannot be imported into a different valuation context so as to treat the controlled price as the basis for goods not sold at that price. Since the captively consumed molasses were not sold at the statutory price, the controlled price of Rs. 32 per quintal could not be adopted. The proper course was to value the goods on the basis of comparable sales by other assessees at or about the relevant time, and, if necessary, determine an average price where there was variation.

Conclusion: Valuation at the controlled price was impermissible. The matter was remitted for fresh determination of value and duty on the basis of comparable goods sold by other assessees.

Ratio Decidendi: A statutory deeming price fixed for goods actually sold under a price-control law cannot be extended to captively consumed goods under Rule 6(b)(i); such goods must be valued on the basis of comparable market sales.

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