Per Justice U.L. Bhat :

Appellant is absent in spite of notice of hearing but has sent a request for decision of the appeal on merits. We have heard Shri M.Ali, JDR and perused the papers.

2. Appellant manufacturers printing ink and captively consumes the same in the manufacture of calenders and labels. Price List No. 4/87-88 was filed in regard to printing ink in Part IV(a) under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975 showing cost of raw materials, charges and 5% as margin of profit. The Balance Sheet showed the profit in regard to the end-product as 30.89%. Notice was issued to appellant to show cause why 30.89% should not be taken as notional profit in regard to printing ink. Notice was resisted by the appellant but was confirmed by the Assistant Collector. His order was confirmed by the Collector (Appeals). Hence the present appeal.

3. According to Rule 6(b)(ii) of the Valuation Rules, valuation should be based on the cost of production or manufacture including profits, if any, which the assessee would have normally earned on the sale of such goods. There is no dispute in this case that notional profit has to be added; the dispute relates only to the quantum. Lower authorities have treated the profit of the final product as notional profit on the intermediate product. According to appellant they were not justified in doing so.

4. One of the earliest decisions is Food Specialities Ltd. Vs. Appellate Collector, Central Excise and Customs, New Delhi and others reported in 1988 (33) ELT 331. In that case lower authorities added 10% as margin of profit in the absence of data regarding exact pro rata profit margin on the final product (evidently the manufacturer had several products) and since it was a matter of discretion the Tribunal did not interfere. This decision does not throw any light on the principle of law involved. In Dhrangadhra Chemical Works Ltd. Vs. Collector of Central Excise, Madurai, 1988 (34) ELT 656 also referred to in the course of arguments, this aspect of the matter has not been discussed. In Dhrangadhra Chemical Works Ltd. Vs. Collector of Central Excise, Madras 1988 (35) ELT 202, the Tribunal observed that in computing the margin of profit on metal containers captively consumed there is no relevance of the margin of profit earned on the sale of caustic soda duly packed in the metal containers. In Graphite India Ltd. Vs. Collector of Central Excise, Calcutta 1995 (78) ELT 17 in determining the value of Head Blocks manufactured and captively consumed in the manufacture of graphite electrodes, 50% of the profit linked with the finished product as shown in the balance sheet was added and the Tribunal holding that what was done was reasonable declined to interfere. In Kanoria Chemical Industries Vs. Collector of Central Excise, Allahabad 1995 (80) ELT 795 the party declared notional profit margin as 5% which was increased by the Assistant Collector to 10% in the absence of specific data. Collector (Appeals) held this to be arbitrary and directed the Assistant Collector to add 6.97% as margin of profit since this percentage of profit had been earned on bleaching powder. Tribunal observed that since the intermediate products were not sold as such profit earned with reference to the finished product has to be taken into consideration while determining the assessable value of the intermediate product. The margins of profit in the relevant four years on the final product were 17.94%, 0.10%, 6.97% and 5.34%. It was held that there is no basis for adding the same percentage namely 6.97% in each of the years and the percentage of profit shown in the balance sheet in respect of finished product should be the profit to be added. It may be noticed that the average rate of profit for finished product for the four years would be around 71/2%. The decision does not give any reason for so holding. In Collector of Central Excise Vs. Bimetal Bearing Ltd., 1996 (81) ELT 246 the Tribunal held difficulty aris