Custom, Excise & Service Tax Tribunal
Raj Finoxides Pvt. Ltd vs Commissioner Of Central Excise, ... on 21 September, 2016
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE
TRIBUNAL, KOLKATA
EASTERN ZONAL BENCH: KOLKATA
Appeal No. E/75215-75216/2014
(Arising out of Order-in-Original No. 42-43/Commissioner/CE/KOL-IV/2013 dated 21/11/2013 Passed by the Commissioner of Central Excise, Kolkata
FOR APPROVAL AND SIGNATURE
HONBLE SHRI H.K.THAKUR, MEMBER (TECHNICAL)
HONBLE SHRI P. K. CHOUDHARY MEMBER (JUDICIAL)
1. Whether Press Reporters may be allowed to see
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
CESTAT(Procedure) Rules, 1982 for publication in any
Authorative report or not?
3. Whether Their Lordship wishes to see the fair copy
of the Order?
4. Whether Order is to be circulated to the Departmental
Authorities?
1. Raj Finoxides Pvt. Ltd.
2. Sambhu Nath Shaw
Applicant (s)/Appellant (s)
Vs.
Commissioner of Central Excise, Kolkata.
Respondent (s)
Appearance:
Shri B. N. Chattopadhyay, Cousultant of the Appellant (s) Shri K. Choudhari, Suptd (AR) for the Respondent (s) CORAM:
HONBLE SHRI H.K.THAKUR, MEMBER (TECHNICAL) HONBLE SHRI P. K. CHOUDHARY MEMBER (JUDICIAL) Date of Hearing/Decision: 21.09.16 ORDER No.FO/A/76093-76094/2016 Per Shri H.K.Thakur These appeals have been filed by the appellants against OIO No. 42-42/Commissioner/CE/KOL-IV/2013 dt 21/11/2013 passed by CCE, Kolkata-IV as Adjudicating authority. Appeal No. E/75215/14 has been filed by the appellant M/s Raj Finoxides Pvt. Ltd. (RFPL) and appeal No. E/75216/14 has been filed by appellant Shambhu Nath Shah who is the Director of RFPL.
2. Sh. B. N. Chattopadhyay (Consultant) appearing on behalf of the appellants argued that RFPL is the manufacturer of Lead ingots and Alloy ingots of various grades falling under CETH 7801 of the first schedule to the Central Excise Act 1985. That apart from manufacturing lead alloy ingots from their own raw materials RFPL is also making such lead ingots of various grades from waste & scrap, dross, sump paste, lead sludge, lead dust, scrap oxide received from M/s Exide Industries Ltd. (EIL) under Rule- 4(5) (a) of the Cenvat Credit Rules 2004. That the said raw materials are received by RFPL under Job work challans & are sent back to the principle after doing the processes as job worker.Learned consultant made the bench go through some of these challans. That Sh. Biswajit Bose of M/s EIL has deposed in his statement dt 3/7/12, recorded during investigation, that EIL are sending raw materials on regular basis to the appellant under Rule 4 (5) (a) of the Cenvat Credit Rules 2004, That as per the purchase orders the recovery percent of lead ingots varies depending upon the nature of raw material supplied by EIL. Learned consultant made the bench go through terms & condition of one such purchase order at Page 264 of the appeal memorandum.
2.1. It is the case of the RFPL that once inputs are received under Rule 4 (5) (a) of Cenvat Credit Rules 2004 then Job worker is not required to pay any duty. Learned consultant relied upon larger bench case law of MIS Wyeth Laboratories Vs CCE Bombay [2000 (120) ELT (218) (Tribunal LB)] to argue that no duty is chargeable from the job worker. This this larger Bench decision has been subsequently relied upon in the following case laws:-
(i) Hindustan Cables Ltd. Vs CCE Raipur [2001 (138) ELT 384 (Tri.-Kolkata)]
(ii) Binani Zinc Ltd. Vs CCE Cochin [2002 (05) LCX 0249]
(iii) Shakti Wires Products Vs CCE Mumbai-V [2009 (03) LCX 0135]
(iv) CCE Belapur Vs Plastika Industries [2015 (12) LCX 0110) [2016 (335) ELT 574 (Tri.-Mumbai)] 2.2. Learned Consultant further argued that Adjudicating authority has taken ratio of 1kg lead alloy for every 1.07 kgs of lead scrap used, as per stander input output norms, when calculating the yield of the finished Alloy Lead ingots when the materials received by the appellant are not standared waste / scrap and yield is much less as per purchase orders of EIL. That only due to erroneous ratio of input-output taken by investigation excess production has been calculated when nothing has been clandestinely cleared as no such seizure of alleged clandestine removal has been made by the investigation. Input Output Norms under C1195 read with ISRI scrap Specification ratio of 1: 1.07 kg will be applicable to highly refined scrap of Radio, Rakes & Relay type of stander scraps & not to the inferior scraps received by the appellant RFPL from EIL.
3. Sh. K. Choudhari Suptd (AR) appearing on behalf of the Revenue strongly defended the order passed by the Adjudicating authority. He made the bench go through Paras 4.4 to 4.9 of the OIO dated 21/11/13 to argue that claim of the appellants in the grounds of appeals are not justified and appeals filed by the appellants need rejection.
4. Heard both sides & perused the case records. The issues involved in these proceedings are:-
(i) whether RFPL is required to discharge duty on intermediate goods manufactured on job work basis when inputs are received from EIL under Rule-4 (5) (a) of the Cenvat Credit Rules 2004?
(ii) Whether standard input-output norms have been rightly made applicable by the department for calculating the yield of Alloy Lead ingots manufactured by the appellant out of the raw materials supplied by EIL under job work challans..
5. The issue framed at Para- 4 (i) above is no more res-integra and has been decided by Larger Bench in the case of Wyeth Laboratories Ltd. Vs CCE Bombay [2000 (120) ELT 218 (Tribunal LB)] with respect to Rule 57 F (2) & F (4) of the Central Excise Rules 1944. Relying upon this five member larger bench decision CESTAT Mumbai in the case of Shakti Wire Products Vs CCE Mumbai-V (Supra) held as follows:-
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 Rules, 2004.
9.Five Member? Bench of the Tribunal in the case of Wyeth Laboratories Ltd. v. 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.
6. In the case of CCE Belapur Vs Plastika Industries (Supra) CESTAT held that no duty liability is attracted, when plastic waste & scrap in processed under Notification No. 214/86-CE, as discussed in Para- 5, 6&7 reproduced below:-
5.?On perusal of the records we find that the issue involved is regarding demand of duty on the respondent for clearance of waste and scrap during the period 1998-99 to 1999-2000 on the ground that the duty liability needs to be discharged on such clearance while it is the case of the assessee-respondent that they had cleared the waste and scrap under the provisions of Notification No. 214/86-C.E. and received back the granules which are used for manufacturing process.
6.?At the outset we find that both the lower authorities have given concurrent findings as to the demand being unsustainable. Both the lower authorities have recorded a factual finding that the plastic waste and scrap generated during the manufacture is sent to manufacturer for converting the same into granules and receiving the same back for further use in the manufacture of finished goods. Both the lower authorities have come to this conclusion after considering all the records of the case before them.
7.?Revenues claim that benefit of Notification No. 214/86-C.E. cannot be made applicable to waste is incorrect as the said notification applies for the goods manufactured by a jobworker on jobwork basis and to be used in or in relation to the manufacture of final products on which duty of excise is leviable whether in whole or in part. In the case in hand, it is undisputed that the plastic waste and scrap which gets generated during the manufacture of final products are sent to jobworker and received back as granules which are further consumed in the manufacture of final products. On the face of such factual matrix, in our view, both the lower authorities were correct in holding that no liability arise on the respondent-assessee.
7. In view of the above settled legal propositions no duty liability is attracted when goods are processed by the appellant under Rule-4(5) (a) of Cenvat Credit Rules 2004. Annexure-II challans prepared by M/s EIL contain the description of inputs, its quantity, etc and Part-II of this challan filled in by the appellant also contained the quantity of finished goods sent back to M/s EIL. In view of the above appellant is not required to discharge Central Excise duty on the finished goods processed as job worker under Rule-4 (5) (a) of the Cenvat Credit Rules 2004.
8. On the issue framed at para 4 (ii) above it is observed from the show cause notice & Para- 4.8 of the OIO dt 21/11/2013 that a ratio of 1kgs of lead alloy from 1.07 kgs of lead scrap, as per Input-Output Norms, has been considered for calculating the quantum of lead ingots manufactured & for alleged clandestine removal. As per Foreign Trade Policy Input-Output Norms for duty exemption scheme following has been prescribed under heading C1195:-
Sr. No. Export Item Import Item Name Quantity Name Quantity Allowed C1195 Lead Ingots 99.97% Purity/Antimonial Lead (Lead Antimony Alloy)/Calcium Lead Alloy (Lead Calcium Alloy) 1 kg.
1. Lead Scrap Namely ISRI Radio Racks, Relay, Ropes & Roses.
1.06 Kg Content Export Product The input-output norms for expected yield of lead is with respect to standard lead scraps like ISRI Radio, Rakes, and Relay etc. Scrap Specifications Circular 2013 by Institute of Scrap Recycling Industries (ISRI) has described scraps like Radio, Rakes & Relay as follows:-
-Radio MIXED HARD/SOFT SCRAP LEAD Shall consist of clean lead solids, free of other materials, such as drosses, battery plates, lead covered cable, collapsible tubes, type metals, aluminum, zinc, iron and brass fittings, dirty chemical lead and radio- active materials. Review packaging specifications and regulatory status pertaining to shipping with buyer prior to sale.
-Rakes BATTERY LUGS To be free of scrap lead, wheel weights, battery plates, rubber and/or plastic case material and other foreign material. A minimum of 97% metallic content is required. Review packaging specifications and regulatory status pertaining to shipping with buyer prior to sale.
-Relay LEAD COVERED COPPER CABLE Free of armored covered cable, and foreign material. 8.1. From the above standard literature input-output norms will be applicable when lead ingots are made from highly refined waste & scrap of lead which is free from drosses,, collapsible tubes, other metals, etc where lead metal content could be 97% or more. On the contrary appellant RFPL is getting following categories of waste & scrap with the yield expected by M/s EIL:-
Waste & Scrap Category Recovery Sump Paste --------------------------------69% Lead Dust ----------------------------------79% Scrap Oxide---------------------------------83% Anti Alloy Dross --------------------------74% Cal Alloy Dross ---------------------------78% Mix Scrap Lead Dross -------------------78% Anti Scrap Plate --------------------------84%
9. In view of the above observations we are of the considered opinion that input output norms of 1 kg of lead for every 1.07 kg of waste & scrap can not be made applicable to all categories of waste & scrap and can be made applicable only to standards waste & scrap where metal content in the waste and scrap is 97% or more. If the department was not agreeable to the % recovery prescribed by M/s EIL then the only way to reject that could have been to have sample yield studies done by the investigation to determine recovery yield percentages. There is no evidence that any lead ingots have been cleared clandestinely except presumptions surmises & theoretical calculations based on standard Input-output norms which does not apply to the waste & scrap received by the appellant from M/s. EIL.
10. In view of the above observation and settled proposition of law there is no justification either for demanding duty or for imposition of penalties against the appellants. Appeals filed by the appellants are accordingly allowed by setting aside OIO dt 21/11/2013 passed by the Adjudicating authority.
(Operative part of the order was pronounced in the open court.) (P.K. CHOUDHARY) (H.K. THAKUR) JUDICIAL MEMBER TECHNICAL MEMBER T. K. 2 Appeal No. E/75215-75216/14