SC: ‘Value’ of the raw material can not be considered for the purpose of 'value' while determining the refund under section 173-l

 

The division judge bench of Justice M R Shah and Justice Krishna Murari of the Supreme court in the case of M/s Peacock Industries Ltd Vs Union of India and Ors held that the “value” of the raw material can be considered for the purpose of “value” while determining the refund under Section 173­L cannot be accepted. 

BRIEF FACTS

The factual matrix of the case is that the appellant-assesse submitted a claim for excise duty refund on the basis of accepting the rejected goods returned to it by its distributors, for which it issued credit notes to the parties. It was also stated that the assesse is entitled to get the refund to the extent of the value of the returned goods under Section 173­L of the Central Excise Act and the Rules, 1944. Further, on behalf of the assessee, it was argued that the value for refund purposes should be determined after taking into account the market value of goods returned as secondhand goods. In the alternative, the assessee argued that because the returned goods can be reused as raw material, the value of raw material can be used to calculate the refund.

After 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 to the refund considering Section 173­L (v). The order passed by the deputy commissioner regarding denying the refund was duly challenged before the tribunal. The tribunal also dismissed the appeal. Thereafter, the reference was made to the high court.

COURT’S OBSERVATION 

The hon’ble apex court stated that neither the deputy commissioner nor the tribunal or even the high court has committed any error in rejecting the refund claim of the assessee. It should be noted that the Department determined the value of returned goods at Rs.8 to 10 per kg after giving the assessee an opportunity to comment on the value of the returned goods and taking into account the material on file, including the market survey report. The assessee provided no convincing evidence regarding the value of the returned goods. The assessee only produced invoices for the secondary market and the value of returned goods depends upon the defects found in the manufactured goods. Therefore, the assessee has to lead the evidence with respect to each consignment of the returned goods, which the assessee failed to prove in the present case. It was also stated that the assessee neither asked for a 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. Further, that issue is not raised before the tribunal. Therefore, this issue should not be raised before the hon’ble high court.  

 

It was further stated that the assessee's submission that because the returned goods are reusable for the manufacture of the products, the value of the raw material can be considered for the purpose of determining the value for refund is not supported by any statutory provision, particularly Section 173L of the Central Excise Act and/or the Central Excise Rules. 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 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. Further, the appellant is rightly denied the refund of the excise duty paid.  Denial of the refund is in consonance with Section 173­L (v) of the Central Excise Act.

CASE NAME- M/s Peacock Industries Ltd Vs Union of India and Ors 

CITATION- CIVIL APPEAL NO. 6144 of 2010 

DATED- 05.09.22

CORUM- Justice M R Shah and Justice Krishna Murari

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