Captive consumption valuation turns on whether gross profit or net profit forms the correct assessable value margin.

For captively consumed goods under Rule 6(b)(ii) of the Central Excise Valuation Rules, the dispute concerned whether the assessable value should include the company's gross profit or only net profit after depreciation and interest. The appellant relied on a section 37B order and accounting principles to support inclusion of net profit rather than gross profit. Because the lower authorities had not examined this specific valuation question, the record was insufficient for a final determination. The matter was remitted to the original adjudicating authority for fresh decision on the limited issue of the correct profit basis to be added in assessable value.

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Issues: Whether, while determining the assessable value of captively consumed goods under Rule 6(b)(ii) of the Central Excise Valuation Rules, the gross profit of the company or the net profit after providing for depreciation and interest was required to be added.

Analysis: The dispute before the appellate forum centred on the manner of computing the margin of profit for goods consumed captively. The appellant accepted that profit of the manufacturing unit as part of the juristic person could be relevant, but contended that the authorities ought to have taken net profit rather than gross profit, relying on the Board's order issued under section 37B and the cited accounting principles. Since this specific question was not examined by the lower authorities, the record was insufficient for a final determination on the correctness of using gross profit or net profit.

Conclusion: The matter was remitted to the original adjudicating authority for fresh decision on the limited question whether gross profit or net profit of the company is to be added in the assessable value.

Ratio Decidendi: Where the precise basis for computing margin of profit in captively consumed goods has not been examined by the lower authorities, the issue must be decided afresh on remand in accordance with the applicable valuation rule and binding administrative guidance.

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