Hi Kalyan,
Picture below shows where the valuation class is maintained in Material Master (MM02)
We have value 2999 for C2 (Refurbished) and C3 (Defective) and 2301 for New Material.
As suggested you may consult the FI and MM experts.
Also referring to
SAP ERP - Logistics Materials Management (SAP MM)
for better help in this regard
Jogeswara Rao K