1991 (12) TMI 180 - AT - Central Excise

Summary

Issues:
- Interpretation of Rule 97 of the Central Excise Rules regarding refund claims for damaged cigarettes.
- Determining the market value of damaged cigarettes for the purpose of refund under Rule 97.

Detailed Analysis:

Issue 1: Interpretation of Rule 97
The case involved appeals by cigarette manufacturers against rejection of their refund claims under Rule 97 of the Central Excise Rules. The key issues raised were whether specific clauses of Rule 97 were satisfied and whether cigarettes were excluded from the rule's scope during the relevant period. The Tribunal held in favor of the manufacturers on one issue but dismissed the appeals based on another clause. The manufacturers sought a reference to the High Court on the latter issue, arguing that it involved an interpretation of law pertaining to Rule 97.

Issue 2: Determining Market Value for Refund
The main contention revolved around whether the amount reimbursed to dealers via credit notes for damaged cigarettes could be considered the market value of the damaged goods. The manufacturers argued that the credit notes represented the market value as they aimed to preserve their reputation by compensating dealers. They contended that the intrinsic value of the damaged cigarettes, particularly the retrieved cut tobacco, should be considered for refund purposes. The Tribunal rejected this argument, emphasizing that the market value at the time of return to the factory should not be less than the duty originally paid. The Tribunal's decision was based on the lack of evidence indicating the market value of the damaged cigarettes and the nature of the reimbursement process.

Conclusion
The Tribunal decided to refer one question to the High Court for clarification: whether the reimbursement amount for damaged cigarettes, issued as credit notes to dealers, could be deemed the market value for refund purposes under Rule 97. This reference sought to resolve the interpretation of the market value concept in the context of damaged goods and reimbursement practices. The decision highlighted the need for a legal interpretation regarding the application of Rule 97 to damaged cigarettes and the determination of market value for refund claims, emphasizing the importance of authoritative pronouncements in resolving such legal issues.