Scrap valuation must match actual quality and utility; higher comparable rate rejected without proof of true comparability.

Valuation of scrap for excise duty must reflect the actual quality and market utility of the goods cleared, and a higher rate for a different scrap category cannot be applied without acceptable evidence of true comparability. The scrap generated by the assessee was milling, turning and swarf scrap suitable for melting, while the job worker's scrap consisted of end bits and cut bits capable of direct use in manufacture. As the two categories were materially different and the department failed to prove that the assessee's adopted value was incorrect, the lower value adopted by the assessee was upheld and the differential duty demand was rejected.

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Issues: Whether the Revenue was justified in demanding differential duty by valuing the scrap cleared by the assessee at the higher rate adopted for a different category of scrap generated at the job worker's premises.

Analysis: The scrap cleared by the assessee consisted of milling, turning and swarf scrap generated during manufacture and was suitable for melting and use in castings, whereas the scrap arising at the job worker's premises comprised end bits and cut bits of plates and sheets capable of direct use in manufacture of components. The two categories were of different quality and utility, and the Revenue did not adduce acceptable evidence to show that the market value of the scrap cleared by the assessee exceeded the value adopted by it. The lower appellate authority had correctly appreciated the nature of the scraps and the evidence on record.

Conclusion: The lower value of Rs. 6500 per MT adopted by the assessee for the scrap cleared by it was upheld, and the Revenue's demand for differential duty was not sustained.

Ratio Decidendi: Where goods are shown to be of different quality and market utility, valuation cannot be forced to align with a higher-priced comparable unless the department proves, with acceptable evidence, that the goods are truly comparable and that the adopted value is incorrect.

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