Cost-based excise valuation disallows notional profit loading absent proof of actual profit in manufacture.

Where electricity poles were transferred from a manufacturing division to its parent electricity board without an actual sale, assessable value could not be fixed on the transfer price alone. Valuation had to follow Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975, which permits profit addition only if profit was actually involved in manufacture. Because the record contained no factual finding of actual profit, a 10% notional profit loading was impermissible. The matter required fresh examination by the jurisdictional authority on whether profit existed in the manufacture of the goods.

---

---

Issues: Whether the assessable value of electricity poles transferred by a manufacturing division to its parent electricity board was to be determined on the transfer price or under the cost-based valuation rule, and whether a notional addition towards profit could be made without a finding of actual profit.

Analysis: The transfer of goods was between a manufacturing division and the electricity board without an actual sale, so valuation could not rest on the transfer price as such. In that situation, Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 governed the valuation and permitted inclusion of profit only where profit was in fact involved in the manufacture. The record contained no factual finding that profit had been earned, yet the adjudication had added 10% on a purely notional basis. Such an addition was impermissible, and the issue required fresh examination of the factual data by the jurisdictional authority.

Conclusion: The assessable value was not to be based on a notional profit addition. The matter was remitted for a fresh decision on whether profit existed in the manufacture of the goods.

---