valuation of sample missiles

[Kavali Ramanjeneyulu]

clarification may please be provided on the following issue.

M/s BDL is manufacturing missiles and selling to Army based on agreement price. Before clearance of missiles , the assessee is removing the sample missiles ( ex. 5 for one lot) testing purpose and during the test fire, the sample missiles are consumed. The assessee is removing the sample missiles on payment of duty on the cost construction method( cost o production + 10% of the cost) . Now, the question is whether the sample missiles are assessable to duty on cost construction method or on the basis of comparable goods under rule 4 of Valuation rules.I request clarification on the above issue with any legal provisions/case laws/clarifications.

AI Summary

Transaction value applies where a contractual price exists, overriding valuation rules for test-fired sample missiles.
Where contractual price for missiles exists, the transaction value principle governs excise valuation and valuation rules are secondary. Rule 8 (cost plus margin) is said to apply only to goods consumed internally in manufacture and is inapt for externally cleared samples consumed in testing. A sequential valuation approach-apply transaction value first, then valuation rules if unavailable-is emphasised, with discussion of accounting for consumed samples and duty recrediting when unsampled items are later sold at the contract price.