2004 (3) TMI 656 - AT - Central Excise

Summary

Issues: Alleged short payment of duty on tin containers captively cleared by the manufacturer.

Analysis:
The case involved a manufacturer of tin containers who received a Show-cause Notice for allegedly short payment of duty on containers captively cleared between August 1996 and December 1997. The dispute arose from the valuation method adopted by the manufacturer based on captive cost under Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. The demand for Rs. 2,23,060/- was confirmed, and a penalty of equivalent amount was imposed under Section 11AC of the Act, which was upheld by the Commissioner (Appeals) leading to the appeal before the Tribunal.

The manufacturer argued that the tin containers manufactured for captive consumption were of inferior quality compared to those sold outside the factory. They claimed that the containers for captive consumption were made from tin plate waste, while those sold outside were made from standard quality tin plates. However, the manufacturer failed to provide sufficient data during the proceedings to substantiate this claim. The Commissioner (Appeals) noted the lack of quality-wise stock register and production register maintained by the manufacturer, which was reiterated before the Tribunal without any additional evidence to support the quality differentiation.

The Tribunal emphasized that even if the quality differentiation argument was valid, the manufacturer should have first exhausted the valuation method under Rule 6(b)(i) before resorting to Rule 6(b)(ii). Rule 6(b)(i) requires the price of comparable goods as the base, with adjustments for any differences. The Tribunal found that the containers sold outside and those captively consumed were comparable goods, and adjustments for quality differences could only be considered if supported by conclusive data, which the manufacturer failed to provide. Therefore, the resort to valuation under Rule 6(b)(ii) was deemed unjustified.

Ultimately, the Tribunal upheld the lower authorities' decision to demand duty payment due to the lack of substantial evidence supporting the manufacturer's claims. However, considering the misunderstanding of legal provisions leading to the short-levy, the penalty imposed was reduced to Rs. 50,000/- as a modification to the original order. The Tribunal rejected the appeal, affirming the decision of the lower authorities regarding duty payment but modifying the penalty amount.