[Order per : K.D. Mankar, Member (T)]. - The appellants are manufacturer of tin containers. They were served with a Show-cause Notice alleging short payment of duty in respect of containers which were captively cleared by them during the period from August 1996 to December 1997. It was alleged that despite the sale price of such containers being available, the appellants resorted to adoption of price based on the captive cost in terms of Rule 6(b)(ii) of the Central Excise Valuation Rules, 1975. The demand for Rs. 2,23,060/- was confirmed and penalty of equivalent amount was imposed under Section 11AC of the Act. Appeal against the said order was rejected by the Commissioner (Appeals). Hence the instant appeal before the Tribunal.
2. Heard both sides.
3. It is pleaded by the appellants that they received three qualities of raw materials and the tin containers which they manufacture for captive consumption are of inferior quality compared to the tin containers which are cleared outside the factory to other buyers. The other buyers use the said containers for packing vanaspati and require containers made from standard quality of tin plates, whereas the tin containers issued to their own oil department (captive consumption) are made out of tin plate waste and are of inferior quality. In these circumstances, the appellants are claiming that the goods cleared outside the factory are not of the same quality and comparable. Therefore, there is a justification in adopting the valuation under Rule 6(b)(ii).
4. We have carefully considered the submissions made by the appellants. We note that the Commissioner (Appeals) in his finding has recorded that the appellants have neither maintained quality wise stock register nor production register. During the hearing before the Tribunal, the same submissions which were made before the Commissioner (Appeals) were reiterated. However, the appellants were unable to provide any data to indicate the production of containers separately from each grade of tin plates and their disposal. In other words, the appellants have failed to establish that, what is transferred for captive consumption within the Plant is manufactured only by using inferior quality of raw material and what is sold in the market is made from superior quality of raw material.
5. Even if the appellants were to make a presentation on the above line, in that event also, the resort to valuation under Rule 6(b)(ii) could not have been taken, without exhausting the method contained in Rule 6(b)(i). In terms of Rule 6(b)(i), the price of comparable goods has to be taken as base and from such price appropriate adjustments are required to be made. The containers sold outside and those captively consumed are obviously comparable goods, and the difference, if any could be only on account of quality of raw material used, if the appellants submissions were to be believed. In this case, the appropriate adjustment such as the price difference between the inferior and superior quality of raw materials could have been taken into consideration provided the appellants furnished the required data, and also establish conclusively that the containers captively consumed were made from a particular grade of tin plate. Against this background, resort to valuation under Rule 6(b)(ii) cannot be supported.
6. In the absence of any worthwhile data to support the claim made by the appellants, we hold that the orders passed by the lower authorities in demanding the duty do not require any interference.
7. However, taking note of the fact that the short-levy occurred on account of the appellant’s misunderstanding of the legal provisions, the penalty imposed calls for reduction. We, accordingly, reduce the penalty to Rs. 50,000/- (fifty thousand only). But for this modification, the impugned order is upheld and the appeal is rejected.