Rule 173L refund applies to reprocessed goods cleared at nil duty, subject to the duty-payable ceiling after reprocessing.

Refund of duty under Rule 173L was permissible for returned excisable goods sent for reprocessing even where the reprocessed yarn was cleared at nil duty to an export-oriented unit, because actual duty-paid clearance after reprocessing was not required. The controlling limit was that refund could not exceed the duty payable on the goods after reprocessing. As the original clearance had been on payment of duty, refund was admissible in principle, but the record lacked quantification of the duty payable on the reprocessed yarn, so the matter had to be remitted to test the refund ceiling.

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Issues: Whether refund of duty under Rule 173L was admissible when the reprocessed yarn was cleared at nil rate of duty to a 100% export oriented unit, and how the ceiling of refund was to be determined.

Analysis: Rule 173L permits refund where excisable goods are returned for remaking, refining, reconditioning or similar processing. The limiting condition in the proviso is that the refund cannot exceed the duty payable on the goods after reprocessing. The applicable principle is that the goods need not actually be cleared on payment of duty after reprocessing; what matters is that the original clearance was on payment of duty and the refund claimed does not exceed the duty payable on the reprocessed goods. Since it was undisputed that the original yarn had been cleared on payment of duty, refund was in principle admissible. However, the record did not show the amount of duty payable on the yarn after reprocessing, which was necessary to test the refund limit.

Conclusion: The refund claim was admissible in principle, but the matter required determination of the duty payable after reprocessing to verify whether the sanctioned refund exceeded the permissible ceiling.

Final Conclusion: The impugned order was set aside and the matter was sent back for quantification of the duty payable on the reprocessed yarn, with liability limited to any excess over the permissible refund ceiling.

Ratio Decidendi: Under Rule 173L, refund of duty is allowable on returned excisable goods reprocessed in the factory even if the reprocessed goods are cleared at nil duty, provided the refund does not exceed the duty payable on the goods after reprocessing.

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