2008 (2) TMI 259 - HC - Central Excise

Assessee submitted a claim for refund of excise duty, on the basis that it having accepted the rejected goods - Tribunal denied refund on ground that the value of goods received back is less than the amount of Duty paid at the time of their clearance - assessee has failed to establish by reliable evidence, that the market value of the goods as received by it back, was more than the excise duty paid thereon refund deniable

Issues Involved:
1. Whether the Tribunal was justified in concluding that the goods received back were plastic furniture scrap and not defective/damaged moulded plastic chairs.
2. Whether the Tribunal was justified in concluding that the value of goods received back was Rs. 8 per kg, which is less than the duty paid at the time of their clearance.

Issue-wise Detailed Analysis:

Issue 1: Nature of Goods Received Back

The Tribunal concluded that the goods received back in the factory were plastic furniture scrap and not defective/damaged moulded plastic chairs. The assessee, a manufacturer of plastic moulded furniture, claimed a refund of excise duty for rejected goods returned by its distributors. The Department, however, determined that the returned goods were plastic furniture scrap, valued at Rs. 8 per kg, and not defective chairs. This finding was based on the process the goods underwent, including grinding into small pieces and mixing with fresh raw material. The Department's conclusion was supported by market surveys and the nature of the goods received, which were found to be plastic scrap rather than defective furniture. The Tribunal upheld this finding, noting that the evidence provided by the assessee, including certificates from dealers and customers, did not sufficiently prove that the goods were anything other than scrap.

Issue 2: Value of Goods Received Back

The Tribunal also concluded that the value of the goods received back by the assessee was Rs. 8 per kg, which was less than the duty paid at the time of their original clearance. The Department conducted market surveys to determine the value of the returned goods, which the assessee contested. The assessee argued that the market survey reports were not reliable and that they had provided evidence showing a higher value for the goods. However, the Tribunal found that the Department's market survey reports were credible and that the assessee failed to provide convincing evidence to counter the findings. The Tribunal noted that the value of the goods, as determined by the Department, was less than the excise duty originally paid, thereby justifying the rejection of the refund claim under Rule 173L(3)(v) of the Central Excise Rules, 1944.

Legal Framework and Principles of Natural Justice

The judgment highlighted the requirements of Rule 173L(3)(v), which stipulates that no refund is admissible if the value of the goods at the time of their return to the factory is less than the duty originally paid. The Tribunal emphasized that the Commissioner's opinion on the value of the goods must be based on material evidence and comply with principles of natural justice. The Department's market survey, conducted twice, was deemed sufficient to form the basis of the Commissioner's opinion. The assessee's failure to challenge the market survey process or provide substantial counter-evidence led to the Tribunal's decision to uphold the Department's findings.

Subsequent Acceptance of Refund Claims

The assessee argued that subsequent acceptance of similar refund claims by the Commissioner should influence the present case. However, the Tribunal clarified that the subsequent claims were governed by Rule 16 of the Central Excise Rules, 2002, which does not contain provisions analogous to Rule 173L(3)(v). Therefore, the subsequent orders did not support the assessee's case.

Conclusion

The Tribunal's judgment was upheld, with both questions of law answered in favor of the Department and against the assessee. The Tribunal's findings were based on substantial evidence, including market surveys and the nature of the goods received. The assessee's arguments regarding the value and nature of the goods were not sufficiently supported by evidence, leading to the rejection of the refund claim.

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