Market value on return of damaged goods under excise rules may not equal reimbursement by credit notes; reference permitted on the legal point.

Rule 97(1)(vi) required the return-value of excisable goods to reflect the market value of the damaged goods themselves, not the reimbursement originally made for cigarettes cleared in good condition. On that construction, credit notes issued to dealers on return of damaged cigarettes could not automatically be treated as the market value of the returned goods, but the unsettled legal question on that point was considered fit for reference to the High Court. A separate proposed question was declined because the refund issue did not turn on sale or offer for sale of the damaged goods.

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Issues: Whether the reimbursement of the cost of cigarettes originally cleared, effected by issue of credit notes to the dealers on return of damaged cigarettes, could be taken as the market value of the returned goods for the purpose of clause (vi) of Rule 97(1) of the Central Excise Rules, 1947, so as to justify a reference to the High Court.

Analysis: The relevant provision required the value of the goods on return to the factory to be the market value of the excisable goods and the opinion of the Collector that such value was not less than the duty originally paid. On the plain reading of the clause, market value had to relate to the damaged goods as returned, not to the reimbursement of the price of the cigarettes when originally cleared in good condition. At the same time, the question whether credit notes issued as reimbursement could be treated as the market value of the returned goods raised a legal issue arising from the order, and the absence of an authoritative pronouncement justified reference on that point. The request for reference on the other question was declined because the refusal of refund was not based on sale or offer for sale of the damaged goods.

Conclusion: The question whether reimbursement by credit notes could be treated as market value under clause (vi) of Rule 97(1) was referred to the High Court, while the other proposed question was rejected.

Final Conclusion: The applications succeeded only to the extent that one legal question was referred for authoritative decision, and the remaining proposed issue was not sent for reference.

Ratio Decidendi: For purposes of Rule 97(1)(vi), the value on return must be the market value of the damaged goods themselves, and a legal question arises where reimbursement by credit notes is suggested as that value, warranting reference when the point is unsettled.

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