Custom, Excise & Service Tax Tribunal
Shakti Wire Products vs Commissioner Of Cen.Excise, Mumbai.V on 16 March, 2009
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL
WEST ZONAL BENCH AT MUMBAI
COURT NO.1
APPEAL NO.E/2666/06
(Arising out of Order-in-Appeal No.CPA(629)86/MV/2006 dtd. 16.06.2006 passed by the Commissioner of Central Excise (A), Mumbai)
For approval and signature:
Honble Mr.A.K.Srivastava, Member(Technical)
And
Honble Mr. Ashok Jindal, Member(Judicial)
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1. Whether Press Reporters may be allowed to see : No
the Order for publication as per Rule 27 of the
CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes
CESTAT (Procedure) Rules, 1982 for publication
in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : seen
of the Order?
4. Whether Order is to be circulated to the Departmental : Yes
authorities?
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Shakti Wire Products
:
Appellant
VS
Commissioner of Cen.Excise, Mumbai.V
Respondent
Appearance
Shri M.H.Sukheja, Consultant for Appellant
Shri S.S.Katiyar, Authorized Representative (DR)
CORAM:
Mr.A.K.Srivastava, Member(Technical)
And
Mr.Ashok Jindal, Member(Judicial)
Date of hearing: 16/03/09
Date of decision :16/03/09
ORDER NO.
Per : A.K.Srivastava
Heard both the sides and perused the records.
2. The appellants, M/s Shakti Wire Products are engaged in the manufacture of excisable goods viz. Copper flats, rods, wires and strips falling under Chapter 74 of the Central Excise Tariff Act, 1985.
3. In the process of manufacture of their final product, remnants of copper generate. These remnants are further sent by them to their job worker for conversion into Copper bar in terms of provision of Rule 4(5)(a) Cenvat Credit Rule, 2004, under job work challans, and returned.
4. During the scrutiny of the monthly records, the Range Superintendent pointed out discrepancy that, the scrap being final product is not entitled to be cleared in terms of Rule 4(5)(a) Cenvat Credit Rule, 2004, and that the same needed to be cleared on payment of duty.
5. Based on the above findings, a Show Cause Notice dated 25.10.2005 was served on the Appellants, for denial of the benefit of Rule 4(5)(a) Cenvat Credit Rule 2004, in respect of clearance of scrap for job work.
6. The Assistant Commissioner, vide Order-in-Original dated 30.1.2006, confirmed the demand of Rs. 4,44,198/- alongwith penalty of Rs. 4,94,198/- and interest. On appeal, the Commissioner(Appeals), vide the impugned Order-in-Appeal dated 16.06.2006, upheld the Order-in-Original passed by the Asstt.Commissioner.
7. We have examined the position. It has been alleged in the show cause notice that since the scrap is a finished goods, it is not permitted to be cleared in terms of Rule 4 (5)(a) to a job worker. However, it is seen that the scrap so sent to the job worker is returned back to the Appellants in the form of ingots, which is then further processed in the Appellants unit to manufacture flats, strips, rods, which are cleared on payment of duty. Thus there is absolutely no loss of any revenue to the Government.
8. The waste and scrap generated are the remnants emerging as a necessary consequence of the manufacturing activity of cold rolling and cold drawing of copper bar undertaken by the appellants for bringing out the final product. These waste and scrap generated during the process of manufacture, instead of being disposed of in the market, is being recycled and re-converted into copper bars, by following the procedure of Rule 4(5)(a) as the appellants do not have any facility for such reconversion. They further consumed the same captively in the manufacture of excisable final product. Merely because the waste and scrap so generated has been made dutiable when sold, it cannot be said that new excisable product has been manufactured. They do not come out as a new excisable product but the same only emerges out of the manufacturing process. As the clearance is made for the specific purpose i.e. for conversion, and not being a sale, they are eligible for the provision of Rule 4(5)(a) of Cenvat Credit Rule, 2004.
9. Five Member Bench of the Tribunal in the case of Wyeth Laboratories Ltd. Vs. Collector of Central Excise, Bombay 2000(120)E.L.T. 218 (Tri-LB) has decided the issue of clearance of scrap for job work. In the said case, it has been held as under:-
Word waste in Rule 57F(4) to be restricted to such converted inputs which are not desired to be used any further for use, in or in relation to the manufacture of the final product Option to exercise the routes available between Rules 57F(2) ( now Rule 4(5)(a) ) and 57F(4) procedures remains with the manufacturer and is not lost by a change in form of the input, due to processing. Modvat Removal of inputs Rule 57F(4) of Central Excise Rules, 1944 cannot be read to be applicable to partially processed inputs or inputs required to be sent for repairs, refining reconditioning or carrying out any other operation necessary as the case may be, for the manufacture of the final product, as long as procedure of Rule 57F(2) is followed. In the same case, it has been further held that Commercial prudence and technological feasibility would induce a manufacturer to reconvert, reprocess, recondition and otherwise deal with intermediate goods, by-product, scrap, refuse, waste, etc. to obtain maximum targeted production of the final product by utilizing the facilities available in his premises or by sending them out on job work to other places. Only when final product is no longer profitable or technologically possible, a manufacturer would treat such resultant stage of by-product, refuse, scrap to be no longer useful and therefore, a waste
10. In view of the above findings of the Tribunal, there is no question of holding scrap as final product and disallowing the benefit of clearance of scrap for converting into ingots, under Rule 4(5)(a). The demand of duty can only be confirmed, if there is diversion of generated scrap for any other purpose other than reconversion. It is not in dispute that in the present case, the scrap cleared by the appellants under job work challan has been returned in the form of ingots and properly accounted for.
11. The Tribunal in the case of Narmada Plastics (P) Ltd. vs. Commissioner of Central Excise, Bhopal reported in 2004(178)E.L.T. 806(Tri-Del.) held Cenvat/Modvat - Waste and scrap, removal of, for reprocessing and return Rule 57F of erstwhile Central Excise Rules, 1944 Benefit of Rule 57F(3) now Rule 4(5)(a) ibid not deniable if after use of plastic granules in manufacture of HDPE/PP Fabrics, left over material sent out under said Rule, for being reprocessed into granules and on return to be used in manufacture of fabrics Such a material not waste or scrap, ineligible to such benefit as an input, if assessee considers it technologically suitable for being reprocessed and again used thereafter as an input in manufacture of final products.
12. To the same effect is the decision of the Tribunal in the case of Jain Metal Components Pvt.Ltd. vs CCE, Jaipur II reported in 2006(206) E.L.T. 842 (Tri-Del.) which holds as under:
Cenvat/Modvat Waste Brass components from brass rods manufactured Removal of brass waste for remelting and return by job worker for further use in manufacture Revenue contended that Rule 57AC of erstwhile Central Excise Rules, 1944 not applicable as only input or capital goods to be removed thereunder and brass scrap is not input. Duty demanded on said brass waste and scrap Waste to be understood to denote a form of inputs after partial or full reprocessing which could not be used further Impugned order set aside.
13. In the impugned Order-in-Appeal, the Commissioner(Appeals) has given findings only on the dutiability of scrap relying on the case of Khandelwal Metal Industries 1985(20)ELT 222(SC) and M/s. Elphinstone Metal Rolling Mills 2004(167)E.L.T. 481 (S.C.) which has got no relevance in this case. The above judgments can be distinguished from the facts and circumstances of the case in question, as the dispute is regarding the clearance of waste and scrap under Rule 4(5)(a) for conversion into bar and its return. Whereas the case of Khandelwal Metal Industries is regarding classification of imported scrap as waste and scrap, and not as master alloy as claimed by the assesse, and the case of Elphinstone Metal Rolling Mills is regarding the applicability of the exemption notification Nos. 74/65-CE/119/66 for the clearance of final goods without payment of duty and manufactured from the duty paid scrap. It is contested whether the market purchased scrap without duty paying documents can be considered as deem duty paid or not, and it was held to be dutiable only when considered as manufactured product and not otherwise viz. market purchased. Thus, these case laws are not applicable to the present issue. The appellants in the present case, have not contested that when the scrap is cleared on sale, no duty is payable.
14. In the light of the foregoing discussions, we hold that the impugned order passed by the Commissioner(Appeals) is not sustainable. The same is set aside. The appeal filed by the appellants is allowed.
Ashok Jindal Member(Judicial) A.K.Srivastava Member(Technical) pv 6