2000 (11) TMI 481 - AT - Central Excise

Issues Involved:
1. Valuation of Quartz Analog watches
2. Classification and duty liability of pencils (specifically eyebrow pencils) under Central Excise Act

Issue-wise Detailed Analysis:

1. Valuation of Quartz Analog Watches:

Background:
In the appeal filed by M/s. Titan Industries Limited (M/s. TITAN), the matter related to the valuation of 2000 Quartz Analog watches (Aquara model) sold to M/s. Fairdeal Traders at a reduced price of Rs. 261.22 per watch, compared to the normal price of Rs. 400.18 per watch.

Arguments and Findings:
- The Show Cause Notice (SCN) dated 27-8-1993 alleged that the declared price was unacceptable, and M/s. TITAN was directed to pay duty based on the Part I price of Rs. 400.18 per watch.
- M/s. TITAN argued that M/s. Fairdeal constituted a different class of buyers, justifying the reduced price. However, the Commissioner of Central Excise (Appeals) disagreed, noting that M/s. Fairdeal were stockists and not wholesale dealers, and there was no commercial consideration for the reduced price.
- The Tribunal considered the arguments that the Aquara model watches had become obsolete and were taken by M/s. Fairdeal for distribution as gifts. However, it was determined that M/s. Fairdeal could not be considered a different class of buyer since they were stockists and had previously received the same model at the higher price of Rs. 400.18.
- The Tribunal found no evidence of commercial considerations necessitating the price reduction and concluded that the supply to M/s. Fairdeal at a reduced price did not align with the provisions of Section 4 of the Central Excise Act, 1944. The appeal was rejected, and the demand for differential duty of Rs. 31,960.80 was upheld.

2. Classification and Duty Liability of Pencils:

Background:
The second issue arose from an Order-in-Original where the appellant was alleged to have removed eyebrow pencils without payment of duty, misdeclaring them as exempted pencils.

Arguments and Findings:
- The SCN alleged that the appellant removed eyebrow pencils without duty and without gate passes, under the guise of special quality black pencils, and imposed a demand of Rs. 46,327.32 and a penalty of Rs. 7,000/-.
- The appellants argued that the samples tested were from stock in the factory and not from the goods removed under the invoices. They maintained that the goods cleared were exempted black pencils (Eyetex), not eyebrow pencils.
- The Tribunal noted that the Chemical Examiner's report was inconclusive, stating that the samples "can be considered as eyebrow pencils." There was no direct evidence linking the test results to the goods cleared under the invoices.
- The Tribunal emphasized that the burden of proof was on the Revenue to show that the goods removed were eyebrow pencils. The lack of seizure of the consignment or direct evidence linking the samples to the cleared goods meant the Revenue did not discharge this burden.
- The Tribunal concluded that the test results could not be applied to the goods removed through the invoices in question. Therefore, the Revenue failed to prove misdeclaration, and the demand was unsustainable. The appeal was allowed, and the impugned order was set aside.

Conclusion:
The Tribunal rejected the appeal concerning the valuation of Quartz Analog watches, upholding the demand for differential duty. In the case of the pencils, the Tribunal found the Revenue had not proven misdeclaration and allowed the appeal, setting aside the demand and penalty.

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