1997 (1) TMI 338 - AT - Central Excise

Tribunal Rejects Refund Claims for Goods: Market Value Key

The Tribunal overturned the Collector (Appeals)' decision to allow refund claims for deteriorated goods, reinstating the Assistant Collector's rejection. ... Refund - Return of deteriorated goods to appellant’s factory Issues:- Appeal against rejection of refund claims under Rule 97 and Rule 173L of the Central Excise Rules, 1944.- Interpretation of the term 'value' in the context of refund claims for deteriorated goods.- Determination of whether the price paid for returned goods represents their actual value.- Comparison of the market value of deteriorated goods with the duty originally paid.Detailed Analysis:1. The appeals were filed against the rejection of refund claims by the Collector of Central Excise (Appeals) for two orders-in-original passed by the Assistant Collector. The Collector (Appeals) allowed the refund claims under Rule 97 and Rule 173L of the Central Excise Rules, 1944, leading to the filing of these appeals by the Collector of Central Excise.2. The respondent, a cigarette manufacturer, took back deteriorated cigarettes from wholesalers and paid or refunded the cum-duty price to the dealers. The Assistant Collector rejected the refund claims, stating that the value of the goods taken back was practically nil due to deterioration. However, the Collector (Appeals) held that since the cum-duty price paid was higher than the duty originally paid, the condition regarding value was satisfied, allowing the refund claims.3. The appellant contended that the term 'value' in the rules refers to the genuine value, which was practically nil for the deteriorated goods. The burden of proof was on the respondent to establish the value, which was not done satisfactorily. The respondent argued that the amount paid to dealers represented the sale price and satisfied the condition for refund, citing legal precedents to support their position.4. The Tribunal analyzed the nature of the transactions where deteriorated goods were taken back and concluded that they constituted sales. However, the mere fact that a price was paid does not necessarily equate to the actual value or market value of the goods. The explanation in the Rules clarified that 'value' refers to the market value of the goods, not the ex-duty value.5. The Tribunal emphasized that the price paid by the respondent for the deteriorated goods did not reflect their actual market value. The respondent's decision to pay an amount equal to the cum-duty price was driven by extraneous reasons, not the true value of the goods. The burden was on the respondent to prove that the value of the goods taken back was not less than the duty originally paid, which was not established satisfactorily.6. Referring to a previous case, the Tribunal highlighted the importance of having reasonable data to determine the value of returned goods. In the absence of such data, the refund claims could not be sustained. The Tribunal concluded that the Collector (Appeals) erred in allowing the refund claims and reinstated the orders passed by the Assistant Collector, thereby allowing the appeals against the rejection of refund claims.