M/S Peacock Industries Ltd. vs Union Of India

REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 6144 of 2010

M/s Peacock Industries Ltd. … Appellant

Versus

Union of India and Ors. … Respondents

JUDGMENT

M. R. Shah, J.

1. Feeling aggrieved and dissatisfied with the impugned

judgment and order dated 06.02.2008 passed by the High

Court of Judicature for Rajasthan at Jodhpur in Tax Reference Signature Not Verified Digitally signed by NIRMALA NEGI Date: 2022.09.05 17:09:35 IST Civil No.26 of 2004, the dealer – assessee has filed the present Reason:

appeal.

2

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

as under:

2.1 That the appellant – assessee is a 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.

2.2 It was the case on behalf of the assessee that the

assessee is entitled to the refund to the extent of the value of

the returned goods under Section 173­L of the Central Excise

Act and the Rules, 1944 thereunder. It was the case on behalf

of the assessee that the value for the purpose of refund shall

be considered after considering the market value of goods

returned as second­hand 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. A show cause notice

was issued by the Deputy Commissioner. Ample opportunity 3

was given to the assessee on the value of the returned goods.

The assessee produced the invoices of the second­hand goods

but did not lead any evidence on the value of the goods

returned. However, 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).

2.3 The assessee challenged the order passed by the Deputy

Commissioner denying the refund before the learned Tribunal.

The learned Tribunal dismissed the appeal. At the instance of

the assessee the reference was made to 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. It was

also the case on behalf of the assessee that the Department 4

wrongly treated the returned goods as scrap and thereby

committed 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.

2.4 By the impugned judgment and order the High Court has

rejected the reference by observing that the value determined

by the Department at Rs.8 to 10 per kg was on appreciation of

evidence and after giving opportunity to the assessee and

relying upon the market survey report(s) which was neither

asked by the assessee nor challenged by the assessee and the

determination of the value at Rs.8 to 10 per kg can be said to

be the question on fact and the same is not required to be

interfered with in the reference.

2.5 The High court has also observed in the impugned

judgment and order that even before the Tribunal also, no

submission was made about copy of market survey report

having not been given and/or on the alleged violation of 5

principles of natural justice. Thereafter by the impugned

judgment and order the High Court has rejected the Reference.

3. Having heard Shri Puneet Jain with Ms. Christi Jain,

learned counsel appearing on behalf of the appellant and Mr.

N. Venkatraman, learned ASG appearing on behalf of the

Revenue and considering the order passed by the Deputy

Commissioner/Assessing Officer and the findings recorded by

the Deputy Commissioner, we are of the opinion 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. At the outset, it is required to be noted that

after giving an opportunity to the assessee on the value of the

returned goods and considering the material on record

including the market survey report the Department

determined the value of returned goods at Rs.8 to 10 per kg.

No cogent evidence was led by the assessee on the value of the

returned goods. The assessee only produced the invoices with

respect to secondary market. However, it is required to be 6

noted that the value of the returned goods depend on the

defects found in the manufactured goods which are returned.

It varies considering the defects. In some returned goods the

defect might be 5% and in some goods the defect might be

80% to 90%. 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. 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.

7

4. 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 reads as under:

"173­L Refund of duty on goods returned to factory. ­ (I) The Collector may grant refund of the duty paid on manufactured excisable goods issued for home consumption from a factory, which are returned to the same or any other factory for being remade, refined, reconditioned or subjected to any other similar processes in the factory.

Provided that:­

XXX XXX XXX

(2) XXX XXX XXX

(3) No refund under sub­rule (1) shall be paid until the process mentioned therein have been completed and an account under subrule having been rendered to the satisfaction of the collector within six months of the return of the goods to the factory. No refund shall be admissible in respect of the duty paid:­

(i) to (iv) XXX XXX XXX 8

(v) If the value of the goods at the time of their return to the factory is, in the opinion of the collector, less than the amount of duty originally paid upon them at the time of their clearance from the factory,

Explanation ­ in this clause, "value" means the market value of the excisable goods and not the ex­duty value thereof. "

4.1 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.

5. As the value of the returned goods determined by the

Deputy Commissioner at Rs.8 to 10 per kg is found to be less

than the amount of duty already paid, the appellant is rightly

denied the refund of the excise duty paid. Denial of the refund 9

is in consonance of Section 173­L (v) of the Central Excise Act.

There are concurrent findings recorded by the adjudicating

authority, the Tribunal and the High Court on the value of the

returned goods which are not required to be interfered with by

this Court in the present proceeding more particularly when

the same was determined by the Deputy

Commissioner/Assessing Authority after giving opportunity to

the assessee.

6. In view of the above and for the reasons stated above, the

present Appeal fails and the same deserves to be dismissed

and is accordingly dismissed.

However, in the facts and circumstances of the case there

shall be no order as to costs.

…………………………………J. (M. R. SHAH)

…………………………………J. (KRISHNA MURARI)

New Delhi, September 5, 2022.

10