M/S. PEACOCK INDUSTRIES LTD. versus UNION OF INDIA AND ORS. on 5 September 2022

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M/S. PEACOCK INDUSTRIES LTD.

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v.

UNION OF INDIA AND ORS.

(Civil Appeal No. 6144 of 2010)

BSEPTEMBER 5, 2022

[M. R. SHAH AND KRISHNA MURARI, JJ.]

Central Excise Act, 1944 – s.173L – Central Excise Rules –Claim for refund of excise duty – Assessee if entitled to the refundto the extent of the value of the returned goods – Held: No cogentCevidence was led by the assessee on the value of the returned goods– Value of the returned goods depend on the defects found in themanufactured goods which are returned – It varies considering thedefects – Therefore, the assessee has to lead the evidence with respectto each consignment of the returned goods, which the assessee failedDto prove in the present case – Further, as the value of the returnedgoods determined by the Deputy Commissioner at Rs.8 to 10 per kgis found to be less than the amount of duty already paid, the appellantis rightly denied the refund of the excise duty paid – Denial of therefund is in consonance of s.173L(v) – Concurrent findings recordedby the adjudicating authority, the Tribunal and the High Court onEthe value of the returned goods not required to be interfered with inthe present proceeding more particularly when the same wasdetermined by the Deputy Commissioner/Assessing Authority aftergiving opportunity to the assessee – Neither the Deputy Commissionernor the Tribunal or even the High Court have committed any errorFin rejecting the refund claim of the assessee.

Central Excise Act, 1944 – s.173L – Value for refund u/s.173L– Held: For the purpose of considering the value for refund u/s.173L what is required to be considered is the value of the returnedgoods – As per explanation to clause (v) of s.173L, “value” meansGthe market value of the excisable goods and not the exduty valuethereof – Therefore, the submission on behalf of the assessee thatthe returned goods may be treated as a raw material and thereforethe “value” of the raw material can be considered for the purposeof “value” while determining the refund u/s.173L cannot beaccepted.H

ORS.

Dismissing the appeal, the Court

HELD: 1.1 Neither the Deputy Commissioner nor theTribunal or even the High Court have committed any error inrejecting the refund claim of the assessee. At the outset, it isrequired to be noted that after giving an opportunity to theassessee on the value of the returned goods and considering thematerial on record including the market survey report theDepartment determined the value of returned goods at Rs.8 to10 per kg. No cogent evidence was led by the assessee on thevalue of the returned goods. The assessee only produced theinvoices with respect to secondary market. However, it isrequired to be noted that the value of the returned goods dependon the defects found in the manufactured goods which arereturned. It varies considering the defects. In some returnedgoods the defect might be 5% and in some goods the defect mightbe 80% to 90%. Therefore, the assessee has to lead the evidencewith respect to each consignment of the returned goods, whichthe assessee failed to prove in the present case. The Departmentheavily relied upon the market survey report and thereafterdetermined the value of the returned goods as Scrap at the rateof Rs.8 to 10 per kg. The assessee participated in the proceedingsbefore the Deputy Commissioner. The assessee neither askedfor copy of the market survey report nor asked for any crossexamination on the market survey report and/or led any cogentevidence on the value of the returned goods. Such a grievance ofnon-supply of market survey report was even not raised beforethe learned Tribunal. Therefore, thereafter it is not open for theassessee to raise the issue with respect to non-supply of themarket survey report for the first time before the High Court.[Para 3][224-F-H; 225-A-C]

1.2 The submission on behalf of the assessee that as thereturned goods can be reusable for the manufacture of theproducts and therefore the value of the raw material can beconsidered for the purpose of determination of the value for refundis concerned the same is not supported by any statutory provision,more particularly Section 173L of the Central Excise Act and/or A

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Aeven the Central Excise Rules. Therefore, for the purpose ofconsidering the value for refund under Section 173L what isrequired to be considered is the value of the returned goods. Asper explanation to clause (v) of Section 173L, “value” means themarket value of the excisable goods and not the exduty valuethereof. Therefore, the submission on behalf of the assessee thatBthe returned goods may be treated as a raw material and thereforethe “value” of the raw material can be considered for the purposeof “value” while determining the refund under Section 173Lcannot be accepted. As the value of the returned goodsdetermined by the Deputy Commissioner at Rs.8 to 10 per kg isCfound to be less than the amount of duty already paid, the appellantis rightly denied the refund of the excise duty paid. Denial of therefund is in consonance of Section 173L (v) of the Central ExciseAct. There are concurrent findings recorded by the adjudicatingauthority, the Tribunal and the High Court on the value of thereturned goods which are not required to be interfered with byDthis Court in the present proceeding more particularly when thesame was determined by the Deputy Commissioner/AssessingAuthority after giving opportunity to the assessee. [Paras 4, 4.1and 5][225-C-D; 226-B-E]

ECIVIL APPELLATE JURISDICTION: Civil Appeal No. 6144of 2010.

From the Judgment and Order dated 06.02.2008 of the High Courtof Judicature for Rajasthan at Jodhpur in Other Tax Reference CivilNo. 26 of 2004.F

Ms. Christi Jain, Puneet Jain, Ms. Shipra Singh, Yogit Kamat,Umang Mehta, Ms. Shruti Singh, Mann Arora, Ms. Pratibha Jain, Advs.for the Appellant.

N. Venkataraman, ASG, Arijit Prasad, Sr. Adv., M. K. Maroria,GH. R. Rao, Rupesh Kumar, Udai Khanna, Mrs. Anil Katiyar, B. KrishnaPrasad, Advs. for the Respondents.

The Judgment of the Court was delivered by

M. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned judgmentand order dated 06.02.2008 passed by the High Court of Judicature forRajasthan at Jodhpur in Tax Reference Civil No.26 of 2004, the dealer –assessee has filed the present appeal.

2. The facts leading to the present appeal in a nutshell are asunder:

2.1 That the appellant – assessee is a manufacturer of plasticmoulded furniture. The assessee submitted a claim for refund of theexcise duty, on the basis of its having accepted the rejected goods,returned to it by its distributors, for which it had issued credit notes tothe parties.

2.2 It was the case on behalf of the assessee that the assessee isentitled to the refund to the extent of the value of the returned goodsunder Section 173-L of the Central Excise Act and the Rules, 1944thereunder. It was the case on behalf of the assessee that the value forthe purpose of refund shall be considered after considering the marketvalue of goods returned as second-hand goods. In the alternative, it wasthe case on behalf of the assessee that as the returned goods can beagain reused as raw material the value of raw material can be the valuefor the purpose of refund. A show cause notice was issued by the DeputyCommissioner. Ample opportunity was given to the assessee on the valueof the returned goods. The assessee produced the invoices of the second-hand goods but did not lead any evidence on the value of the goodsreturned. However, considering the market survey report the AssessingOfficer/Deputy Commissioner valued the returned goods at Rs.8 to 10per kg treating the same as scrap. Thereafter, it was found that thevalue of the returned goods was to be less than the amount of dutyoriginally paid at the time of their clearance from the factory, the assesseeshall not be entitled for the refund considering Section 173-L (v).

2.3 The assessee challenged the order passed by the DeputyCommissioner denying the refund before the learned Tribunal. Thelearned Tribunal dismissed the appeal. At the instance of the assesseethe reference was made to the High Court. Before the High Court itwas the case on behalf of the assessee that the order passed by the A

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AAssessing Authority was in breach of principles of natural justice as thecopy of the market survey report was not furnished to the assessee. Itwas also the case on behalf of the assessee that the Department wronglytreated the returned goods as scrap and thereby committed serious errorin arriving at the value of the returned goods at Rs.8 to 10 per kg andthereby denying the refund to the assessee.B

2.4 By the impugned judgment and order the High Court hasrejected the reference by observing that the value determined by theDepartment at Rs.8 to 10 per kg was on appreciation of evidence andafter giving opportunity to the assessee and relying upon the marketsurvey report(s) which was neither asked by the assessee nor challengedCby the assessee and the determination of the value at Rs.8 to 10 per kgcan be said to be the question on fact and the same is not required to beinterfered with in the reference.

2.5 The High court has also observed in the impugned judgmentand order that even before the Tribunal also, no submission was madeDabout copy of market survey report having not been given and/or on thealleged violation of principles of natural justice. Thereafter by theimpugned judgment and order the High Court has rejected the Reference.

3. Having heard Shri Puneet Jain with Ms. Christi Jain, learnedcounsel appearing on behalf of the appellant and Mr. N. Venkatraman,Elearned ASG appearing on behalf of the Revenue and considering theorder passed by the Deputy Commissioner/Assessing Officer and thefindings recorded by the Deputy Commissioner, we are of the opinionthat neither the Deputy Commissioner nor the Tribunal or even the HighCourt have committed any error in rejecting the refund claim of theFassessee. At the outset, it is required to be noted that after giving anopportunity to the assessee on the value of the returned goods andconsidering the material on record including the market survey reportthe Department determined the value of returned goods at Rs.8 to 10per kg. No cogent evidence was led by the assessee on the value of thereturned goods. The assessee only produced the invoices with respectGto secondary market. However, it is required to be noted that the valueof the returned goods depend on the defects found in the manufacturedgoods which are returned. It varies considering the defects. In somereturned goods the defect might be 5% and in some goods the defectmight be 80% to 90%. Therefore, the assessee has to lead the evidenceHwith respect to each consignment of the returned goods, which the assessee failed to prove in the present case. The Department heavilyrelied upon the market survey report and thereafter determined the valueof the returned goods as Scrap at the rate of Rs.8 to 10 per kg. Theassessee participated in the proceedings before the Deputy Commissioner.The assessee neither asked for copy of the market survey report norasked for any cross-examination on the market survey report and/or ledany cogent evidence on the value of the returned goods. Such a grievanceof non-supply of market survey report was even not raised before thelearned Tribunal. Therefore, thereafter it is not open for the assessee toraise the issue with respect to non-supply of the market survey reportfor the first time before the High Court.

4. The submission on behalf of the assessee that as the returnedgoods can be reusable for the manufacture of the products and thereforethe value of the raw material can be considered for the purpose ofdetermination of the value for refund is concerned the same is notsupported by any statutory provision, more particularly Section 173-L ofthe Central Excise Act and/or even the Central Excise Rules. Section173-L of the Central Excise Act reads as under:

“173-L Refund of duty on goods returned to factory. - (I)The Collector may grant refund of the duty paid on manufacturedexcisable goods issued for home consumption from a factory, whichare returned to the same or any other factory for being remade,refined, reconditioned or subjected to any other similar processesin the factory.

Provided that:-

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(3) No refund under sub-rule (1) shall be paid until the processmentioned therein have been completed and an account undersubrule having been rendered to the satisfaction of the collectorwithin six months of the return of the goods to the factory. Norefund shall be admissible in respect of the duty paid:-

(v) If the value of the goods at the time of their return to thefactory is, in the opinion of the collector, less than the amount of A

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[2022] 11 S.C.R.

Aduty originally paid upon them at the time of their clearance fromthe factory, Explanation - in this clause, “value” means the market value ofthe excisable goods and not the ex-duty value thereof.’’

4.1 Therefore, for the purpose of considering the value for refundBunder Section 173-L what is required to be considered is the value of thereturned goods. As per explanation to clause (v) of Section 173-L, “value”means the market value of the excisable goods and not the ex-dutyvalue thereof. Therefore, the submission on behalf of the assessee thatthe returned goods may be treated as a raw material and therefore theC“value” of the raw material can be considered for the purpose of “value”while determining the refund under Section 173-L cannot be accepted.

5. As the value of the returned goods determined by the DeputyCommissioner at Rs.8 to 10 per kg is found to be less than the amount ofduty already paid, the appellant is rightly denied the refund of the exciseDduty paid. Denial of the refund is in consonance of Section 173-L (v) ofthe Central Excise Act. There are concurrent findings recorded by theadjudicating authority, the Tribunal and the High Court on the value ofthe returned goods which are not required to be interfered with by thisCourt in the present proceeding more particularly when the same wasdetermined by the Deputy Commissioner/Assessing Authority after givingEopportunity to the assessee.

6. In view of the above and for the reasons stated above, thepresent Appeal fails and the same deserves to be dismissed and isaccordingly dismissed.

However, in the facts and circumstances of the case there shallFbe no order as to costs.

Divya Pandey

Appeal dismissed.

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