Intermediate product valuation requires adjusted profit margin, not mechanical use of final product margins.

For valuation of an intermediate product under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, the notional profit margin cannot be mechanically taken from the final product where the two are materially dissimilar in nature, quantity and use. The margin must be suitably adjusted on the facts, and even the final product's gross profit figure cannot be imported without substantial modification. On the facts, remand was unnecessary because the adopted 12.95% figure was not shown to be unjustified, and the valuation stood in favour of the assessee.

---

---

Issues: Whether, for valuation of the intermediate product under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, the notional margin of profit could be taken from the final product without adjustment, and whether remand was necessary for fresh determination.

Analysis: The intermediate product and the final product were materially dissimilar in nature, quantity, and use. The final product was manufactured and cleared in substantial quantity, whereas only one unit of the intermediate product was made. In such circumstances, the profit margin of the final product could not be mechanically adopted for the intermediate product. Some reduction or adjustment was , and even the gross profit figure on the final product could not be used without substantial modification. On the facts, no useful purpose would be served by remand, since the adopted figure of 12.95% was not shown to be unjustified.

Conclusion: The notional margin of profit for the intermediate product could not be fixed at the final product's gross profit without adjustment, and the Collector (Appeals) was justified in adopting 12.95%. The determination was in favour of the assessee.

Ratio Decidendi: Where the intermediate product and the final product are materially dissimilar, the notional profit margin for valuation cannot be mechanically imported from the final product and must be suitably adjusted on the facts of the case.

---