Value Of Returned Goods Is To Be Considered For Refund U/s. 173L Of Central Excise Act – Supreme Court

The Bench of Justice MR Shah & Justice Krishna Murari rejected the contention of the Appellant–Assessee that as the returned goods can be reusable for the manufacture of the products, therefore the value of the raw material can be considered for the purpose of determination of the value for refund.

In this case, the Appellant–Assessee was the manufacturer of plastic moulded furniture. The assessee submitted a claim for refund of the excise duty, on the basis of its having accepted the rejected goods, returned to it by its distributors, for which it had issued credit notes to the parties.

The Appellant had contended that he was entitled to a refund to the extent of value of the returned goods under Section 173L of the Act and Rules, 1944. Further, it was also pleaded that the value for the purpose of refund shall be considered after considering the market value of goods returned as second-hand goods.

In the alternative, it was the case on behalf of the assessee that as the returned goods can be again reused as raw material the value of raw material can be the value for the purpose of refund.

Thereafter, a show cause notice was issued by the Deputy Commissioner and ample opportunity was also given to the Assessee on the value of the returned goods.

Considering the market survey report the Assessing Officer/Deputy Commissioner valued the returned goods at Rs.8 to 10 per kg treating the same as scrap. Thereafter, it was found that the value of the returned goods was to be less than the amount of duty originally paid at the time of their clearance from the factory, the assessee shall not be entitled for the refund considering Section 173­L (v).

The assessee challenged the order of the AO before the Tribunal however, Tribunal dismissed the appeal.

Aggrieved, the Appellant approached the High Court.

Before the High Court, it was the case on behalf of the assessee that the order passed by the Assessing Authority was in breach of principles of natural justice as the copy of the market survey report was not furnished to the assessee.

Further, it was also the case of the Appellant that the Department wrongly treated the returned goods as scrap and thereby committed a serious error in arriving at the value of the returned goods at Rs.8 to 10 per kg and thereby denying the refund to the assessee.

The High Court, however, rejected the reference.

Counsel Puneet Jain and Counsel Christi Jain appeared for the Appellant while ASG N. Venkatraman appeared for the Revenue before the Supreme Court.

The Apex Court noted that neither the Deputy Commissioner nor the Tribunal or even the High Court have committed any error in rejecting the refund claim of the Assessee.

The Bench further observed, "The Department heavily relied upon the market survey report and thereafter determined the value of the returned goods as Scrap at the rate of Rs.8 to 10 per kg. The assessee participated in the proceedings before the Deputy Commissioner. The assessee neither asked for copy of the market survey report nor asked for any cross­examination on the market survey report and/or led any cogent evidence on the value of the returned goods. Such a grievance of non­supply of market survey report was even not raised before the learned Tribunal. Therefore, thereafter it is not open for the assessee to raise the issue with respect to non­supply of the market survey report for the first time before the High Court."

Further, the Court also held, "The submission on behalf of the assessee that as the returned goods can be reusable for the manufacture of the products and therefore the value of the raw material can be considered for the purpose of determination of the value for refund is concerned the same is not supported by any statutory provision, more particularly Section 173­L of the Central Excise Act and/or even the Central Excise Rules. Section 173­L of the Central Excise Act."

Thus, the Bench held, "Therefore, for the purpose of considering the value for refund under Section 173­L what is required to be considered is the value of the returned goods. As per explanation to clause (v) of Section 173­L, "value" means the market value of the excisable goods and not the ex­duty value thereof. Therefore, the submission on behalf of the assessee that the returned goods may be treated as a raw material and therefore the "value" of the raw material can be considered for the purpose of "value" while determining the refund under Section 173­L cannot be accepted."

The Court thus held that as the value of the returned goods determined by the Deputy Commissioner at Rs.8 to 10 per kg was found to be less than the amount of duty already paid, the appellant was rightly denied the refund of the excise duty paid. Denial of the refund was in consonance with Section 173-L (v) of the Act.

Accordingly, the Court dismissed the appeal.

Cause Title - M/s Peacock Industries Ltd. v. Union of India and Ors.

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