Captive consumption valuation allows average market pricing where differential buyer classes and transport factors justify a fair comparable value.

Captively consumed sulphuric acid was to be valued by reference to comparable market prices with reasonable adjustments under the valuation rules. Where the assessee had declared different prices for distinct buyer groups based on distance and transportation factors, the use of an average of the Group A and Group B prices was held to fairly reflect value. The highest declared price for one class of buyers was not required where commercial practice supported differential pricing and earlier valuation principles favoured a fair comparable price without loading captive consumption with unrelated expenses. The assessee's valuation method was upheld and the contrary orders were set aside.

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Issues: Whether captively consumed sulphuric acid was to be valued on the basis of the highest declared price for one class of buyers or on the average of the prices declared for two buyer groups.

Analysis: The valuation had to be determined by reference to comparable goods and with such reasonable adjustments as were warranted by the relevant factors under the valuation rules. The record showed different declared prices for different buyer groups based on distance and transportation considerations, and the accepted commercial practice of differential pricing for distinct classes of buyers supported using an average rather than the highest price alone. Earlier Tribunal decisions on captive consumption valuation also indicated that the value should reflect a fair comparable price and avoid loading the assessable value with expenses not attributable to captive use.

Conclusion: Captively consumed goods were correctly valued at the average of the prices declared for Group A and Group B, and not at the highest Group A price alone.

Final Conclusion: The valuation adopted by the assessee was upheld and the impugned orders were set aside.

Ratio Decidendi: For captive consumption, assessable value must be based on comparable market prices with reasonable adjustments, and where differential pricing exists for distinct buyer classes, an average price may be adopted if it fairly reflects value.

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