2014 (8) TMI 612 - HC - Central Excise

Denial of refund claim - double payment of duty on returned and repaired goods - Whether the Tribunal was right in rejecting the refund claim on the ground that the goods in respect of which refund was claimed was disposed off in any manner, then the production of goods of the same class, ignoring the fact that the goods cleared from the factory before repair and after are machineries only - Held that - It is not in dispute that the goods originally cleared was circular knitting machine falling under sub-heading 8447.00 on which duty was paid. However, on the complaint, the defective parts viz., knitting head assembly and take down drive assembly which falls under sub-heading 8448.90, were returned and similar parts were supplied as replacement. The parts supplied as replacement suffered separate duty. The defective parts returned to the supplier was reconditioned and fitted in an another circular knitting machine and was supplied to another purchaser on which duty was paid. Since the defective parts returned for being reconditioned and subjected to similar process of manufacturing, the assessee claimed refund of duty under sub clause (1) of Rule 173 L. However, proviso (3)(iii) to Rule 173 L would stipulate that the goods (parts) disposed or re-used should be on the production of the goods of same class. What has been returned is not the goods falling under sub-heading 8447.00 of the CETA Schedule, but falling under sub-heading 8448.90 of the CETA Schedule. We find Chapter 84 - Machinery, mechanical appliances and parts thereof, sub-heading 84.48 provides for parts and accessories suitable for use, solely or principally with the machines of this heading or of Heading No.84.44, 84.45, 84.46 or 84.47 (for example, spindles and spindle flyers, card clothing, combs, extruding nipples, shuttles, healds and heald-frames, hosiery needles), 8448.90 - parts. In this case, the goods which have been returned are admittedly fall under 8448.90 parts under separate tariff heading and unless such goods are disposed of in the manner and used for the production of the goods of same class, the question of refund of duty will not arise. - Decided against assessee.

Summary

Issues Involved:
1. Interpretation of Rule 173L of the Central Excise Rules regarding refund of duty on returned goods.
2. Determining whether goods returned and used in the production of other goods of a different class qualify for a refund.
3. Application of Rule 173L provisions to the case of parts returned and incorporated into a different class of machinery.

Analysis:

Issue 1: Interpretation of Rule 173L
The case involves a dispute over the interpretation of Rule 173L of the Central Excise Rules, which allows for a refund of duty on goods returned to the factory for reconditioning or similar processes. The rule specifies conditions under which such refunds can be granted, including the requirement that the returned goods must be used for the production of goods of the same class.

Issue 2: Refund Eligibility for Different Class Goods
The appellant, a manufacturer of textile machinery, claimed a refund of duty under Rule 173L for parts returned and incorporated into another machine. The dispute arose when the Tribunal held that the returned parts, falling under a different sub-heading than the original machine, did not qualify for a refund as they were not of the same class. This decision was based on the provision in Rule 173L(3)(iii) which restricts refunds to goods used for the production of goods of the same class.

Issue 3: Application of Rule 173L Provisions
The Tribunal's decision was influenced by precedents and interpretations of Rule 173L in similar cases. It emphasized that goods returned must undergo required processes and be cleared as such to be eligible for a refund. The decision highlighted that goods falling under a specific tariff heading alone are entitled to the benefits of Rule 173L, reinforcing the requirement for returned goods to be cleared for the production of goods of the same class to qualify for a refund.

In conclusion, the High Court dismissed the Civil Miscellaneous Appeal, upholding the Tribunal's decision that the appellant was not entitled to a refund under Rule 173L due to the returned parts being used in the production of goods of a different class. The judgment reaffirmed the importance of adhering to the provisions of Rule 173L and previous interpretations in determining eligibility for duty refunds on returned goods.