Captive consumption valuation cannot include later refund amounts in normal profit under excise valuation rules.

For captively consumed goods, assessable value under Rule 6(b)(ii) of the Central Excise Valuation Rules must be based on cost of production or manufacture plus the normal profit the assessee would have earned on sale during the relevant period. A refund received in a later year could not be retrospectively treated as part of that normal profit, because the relevant profit is the profit reflected in the accounts for the years of manufacture and captive consumption. Reference to Section 41 of the Income-tax Act did not alter the excise valuation scheme. The subsequent refund therefore could not be added to the profit base, and the demand was set aside.

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Issues: Whether a refund received in a later year could be treated as part of the profit normally earned on captively consumed goods for the purpose of determining assessable value under Rule 6(b)(ii) of the Central Excise Valuation Rules.

Analysis: For captively consumed goods, valuation had to be determined strictly under the express language of Rule 6(b)(ii), namely on the basis of cost of production or manufacture including the profits, if any, which the assessee would have normally earned on sale of such goods. The later refund received in 1984 related to a subsequent development and did not form part of the profit ordinarily earned in the earlier years of manufacture and captive consumption. The profit relevant for those years was the profit reflected in the accounts of those years, and a later refund could not be retrospectively loaded into that figure. The reference to Section 41 of the Income-tax Act, 1961 did not alter the express scheme of the excise valuation rule.

Conclusion: The subsequent refund could not be added to the profit for redetermining the assessable value of the captively consumed goods. The appeal was allowed and the demand was set aside.

Ratio Decidendi: Under Rule 6(b)(ii) of the Central Excise Valuation Rules, only the normal profit attributable to the relevant period of manufacture and captive consumption can enter assessable value, and a later refund cannot be retrospectively treated as such profit.

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