Notional profit in captive consumption valuation must be considered when fixing assessable value under the prescribed rules.

For captively consumed goods, assessable value must be determined under the prescribed valuation mechanism where comparable goods are unavailable, and it should reflect cost of production plus the profit normally earned on sale, even if not actually realised. The earlier view that actual profit from another division could not be included did not control where the relevant notional profit element had been omitted from valuation. The matter was remanded for fresh determination by the adjudicating authority on whether the notional profit element was lower than the percentage adopted by the department.

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Issues: Whether notional profit was required to be included in the assessable value of captively consumed goods under the valuation rules.

Analysis: The valuation of goods cleared for captive consumption had to be determined under the prescribed valuation mechanism where comparable goods were unavailable. The governing principle was that assessable value must reflect the cost of production together with the profit that would normally be earned on sale, even if such profit was not actually realised. The earlier view that actual profit of a different division could not be included did not govern where the relevant notional profit element had been omitted from the assessable value. The matter therefore required reconsideration by the adjudicating authority on the question whether the notional profit element was lower than the percentage adopted by the department.

Conclusion: The notional profit element was liable to be considered in the assessable value, and the matter was remanded to the adjudicating authority for fresh determination.

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