Captive consumption valuation: notional profit cannot be added absent proof that profit was actually earned or normally expected.

For goods captively consumed, valuation under the applicable rules must be based on cost of production or manufacture including profits, if any, that would normally have been earned on sale. Where the assessee showed that no profit had actually been earned during the relevant period and the Department did not rebut that claim, addition of a notional 10% profit was not warranted. The operative point is that profit can be included only when there is evidence that it was actually earned or would normally have arisen on sale; a bare notional uplift is insufficient.

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Issues: Whether, for goods captively consumed, 10% notional profit was required to be added while determining assessable value under the valuation rules.

Analysis: The rule governing captive consumption requires valuation on the basis of cost of production or manufacture including profits, if any, which the assessee would normally have earned on sale of such goods. The assessee's claim that no profit had been earned during the relevant period was not rebutted by the Department. In the absence of proof that any profit was actually earned or normally would have been earned on sale, inclusion of notional profit was not warranted.

Conclusion: Notional profit was not required to be added to the assessable value, and the appeal succeeded.

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