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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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