Scrap valuation of rejected motor vehicle parts cannot be equated with prime goods where they were cleared only as scrap.

Rejected motor vehicle parts separately recorded as reject goods and cleared as scrap could not be valued at the level of prime goods merely because they originated as parts. The department accepted the scrap classification but sought to enhance the value to that of prime motor vehicle parts. On the facts recorded, the material was sold only as scrap, and the record did not support treating it as prime goods for valuation. The department's valuation approach was therefore not sustainable.

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Issues: Whether the goods cleared as rejected motor vehicle parts were liable to be valued at par with prime goods instead of being treated as scrap.

Analysis: The goods in question were rejected by the buyer on quality considerations and were separately recorded in the RG-1 register as reject goods. They were subsequently cleared by the appellants only as scrap. The department did not dispute the scrap classification but sought to enhance their value to that of prime motor vehicle parts. On the facts, scrap could not be equated with prime material, and the record did not show that the goods sold as scrap were in fact being cleared as anything other than scrap.

Conclusion: The valuation adopted by the department was not sustainable, and the issue was decided in favour of the assessee.

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