Adjustment for prior duty paid and proof of comparability govern captive consumption valuation of intermediate yarn.

Duty on captively consumed polypropylene yarn had to be recalculated by giving credit for duty already paid at the narrow woven fabric stage, so the intermediate product was not subjected to double burden; the assessee remained liable only for any balance duty after such adjustment. The departmental valuation of the captively consumed yarn on the basis of sales to independent buyers was upheld because no material was produced to show that the captive yarn was qualitatively different from the yarn sold to outside buyers. The article therefore affirms adjustment for prior duty paid on the finished product, while also confirming that a challenge to valuation must be supported by evidence of non-comparable goods.

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Issues: (i) whether duty demanded on captively consumed polypropylene yarn could be adjusted by the duty already paid at the stage of narrow woven fabrics; and (ii) whether the department was justified in valuing the captively consumed yarn on the basis of sales to independent buyers rather than on costing.

Issue (i): Whether duty demanded on captively consumed polypropylene yarn could be adjusted by the duty already paid at the stage of narrow woven fabrics.

Analysis: The yarn was used captively in the manufacture of narrow woven fabrics, and duty had already been discharged at the fabric stage. Following the ratio of the cited Supreme Court decisions, the duty liability on the intermediate product had to be worked out after giving credit for the duty already paid on the finished fabrics, so that the same transaction was not subjected to double burden.

Conclusion: The duty demand on the yarn was required to be recalculated after deducting the duty already paid at the fabric stage, and the assessee was liable only for the balance, if any.

Issue (ii): Whether the department was justified in valuing the captively consumed yarn on the basis of sales to independent buyers rather than on costing.

Analysis: The assessee did not produce material before the lower authorities to show that the yarn captively consumed was qualitatively different from the yarn sold to independent customers. In the absence of supporting evidence, the valuation adopted by the department could not be displaced.

Conclusion: The departmental valuation was upheld.

Final Conclusion: The duty demand was sustained only to the extent of the balance remaining after adjustment of duty already paid at the fabric stage, while the department's valuation method was accepted.

Ratio Decidendi: Where duty has already been paid on the finished product, duty demanded on captively consumed intermediate goods must be adjusted by that amount, and a challenger to departmental valuation must substantiate any claim that the goods compared are not qualitatively similar.

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