M/s Peacock Industries Ltd. Versus Union of India and Ors.

M/s Peacock Industries Ltd. Versus Union of India and Ors.

Landmark Cases of India / सुप्रीम कोर्ट के ऐतिहासिक फैसले

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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

J U D G M E N T

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

Civil No.26 of 2004, the dealer – assessee has filed the present

appeal.

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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

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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

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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

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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

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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.  

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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

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(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

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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.

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