CENVAT - Rule 4(5)(a) nowhere envisages that waste and scrap generated at job-worker's premises should be brought back by supplier and if they are not brought back, supplier of raw material is liable to discharge excise duty liability - stay granted: CESTAT
By TIOL News Service
MUMBAI, OCT 01, 2013: RAISING demands of duty on the supplier of CENVATTED materials in respect of the Waste arising at the job workers' end upon processing these raw materials has always been a wasteful expenditure but the Revenue authorities probably revel in this exercise.
In the case of Rocket Engineering Corporation Ltd., the CESTAT had eight years ago (2005-TIOL-1313-CESTAT-MUM) [which judgment has been upheld by the Bombay High Court] held thus –
“12. The Central Excise duty cannot be demanded from the appellants since the job worker is the manufacturer of the said scrap, which is retained by him and sold in the market.
13. The similar issue is answered in the case of M/s. International Tobacco Co. Ltd vs. CCE, Ghaziabad (2004-TIOL-16-CESTAT-DEL). It is observed that no process of manufacturing taking place in respect of waste and scrap generated during the course of manufacture of cigarettes. Moreover, provision for duitability of waste and scrap existed only in the erstwhile Central Excise rules, 1944 (Rule 57F) and no such provision is there is the Cenvat Credit Rules 2001. Duty is not leviable under Section 3 of the Central Excise Act, 1944.”
Be that as it may, the story repeated in the case of the present assessee.
The appellants are manufacturers of motor vehicle parts. They sent the raw materials such as iron and steel products and processed good to the job workers for manufacture/further processing under Rule 4(5)(a) of the CCR, 2004 and the goods so brought back were further used in the manufacture of automobile parts on which excise duty liability was discharged. In the processing of goods at job-worker's end, waste and scrap arose which were classifiable under Chapter 72 of the CETA, 1985. However, the job worker allegedly did not discharge duty liability thereon.
Therefore, a SCN was issued to the appellant, the principal manufacturer, demanding duty on waste and scrap which arose at the job-workers' premises amounting to Rs.36,38,930/- during the period September 2010 to March 2012.
The appellant contested saying that he is not the manufacturer of waste and scrap and, therefore, question of his paying any duty on the waste and scrap generated in the job-workers' premises does not arise. But none listened to these submissions and, therefore, the appellant is before the CESTAT.
The appellant reiterated his submissions and also placed reliance on the decisions in EMCO Ltd. = (2008-TIOL-1232-CESTAT-MUM); Rocket Engineering Corporation Ltd. = (2005-TIOL-1313-CESTAT-MUM) and Mahindra Hinoday Industries Ltd. = (2013-TIOL-212-CESTAT-MUM).
The Revenue representative submitted that the lower authorities were right in confirming the demand.
The Bench observed –
“5. We have carefully considered the rival submissions. Rule 4(5)(a) of the CENVAT Credit Rules, 2004 nowhere envisages that the waste and scrap generated at the job-worker's premises should be brought back by the supplier and if they are not brought back, the supplier of raw material is liable to discharge excise duty liability. What is envisaged is that the raw material sent for processing at the job-worker's end, the processed goods should be brought back and if they are not so brought back, the appellant has to reverse the credit taken on the raw materials supplied. The liability to pay excise duty arises not under the provisions of Rule 4(5)(a) of the CENVAT Credit Rules, 2004 but under Section3 of the Central Excise Act, 1944 on the manufacture of a marketable commodity as specified in the Central Excise Tariff Act. In the instant case, when the waste and scrap has arisen in the job-worker's premises, the job-worker is the manufacturer of waste and scrap so generated and not the appellant, who is the supplier of the raw material.”
Holding that in the light of the cases cited, the appellant has made out a strong prima facie case in their favour, the Bench granted an unconditional waiver from pre-deposit of the adjudged dues and stayed the recovery.
In passing: Board should to take a closer look at the issue as each and every Audit report of the Commissionerate is filled with such objections which merely prop up the statistics but rarely generate revenue – probably it is time to wave the undervaluation mantra. Also see (2013-TIOL-1170-CESTAT-MUM).
(See 2013-TIOL-1447-CESTAT-MUM)
