Rule 173L refund cannot be denied on market value grounds when rejected goods never entered the market stream.

Refund under Rule 173L cannot be denied merely because the market value of returned rejected goods is below the duty originally paid where the goods never entered the market stream and permission to operate under Rule 173L was granted on the peculiar facts, subject to conditions for a limited period. In such circumstances, the earlier grant of permission indicates that a normal market-value enquiry may not govern the claim. The operative effect is that, once rejected goods are brought back after inspection and remanufacture and were never sold in the market, a later objection based solely on market value is not sustainable.

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Issues: Whether refund under Rule 173L could be denied on the ground that the market value of the returned rejected goods was less than the duty originally paid, when the goods had not entered the market stream and permission to operate under Rule 173L had been granted in the peculiar facts of the case.

Analysis: The statutory requirement under Rule 173L is that the market value of the returned goods should not be less than the duty originally paid. However, the goods in question had not entered the market stream at all. They had been sought to be removed for testing and inspection because of labour difficulties, and permission under Rule 173L had been specifically granted subject to conditions for a limited period. In these circumstances, the authority granting permission had evidently considered that the normal market-value enquiry would not arise. Once the rejected goods were to be brought back after inspection and remanufacture, and the admitted position was that they never went into the market stream, the later objection based on market value could not prevail.

Conclusion: The objection based on market value was not sustainable, and the refund order was upheld in favour of the assessee.

Ratio Decidendi: Where rejected goods have not entered the market stream and permission under Rule 173L has been specifically granted on the facts, refund cannot be denied merely on a later challenge that the market value was below the duty originally paid.

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