Custom, Excise & Service Tax Tribunal
Aurangabad Electricals Ltd vs Commissioner Of Central Excise, ... on 23 April, 2015
IN THE CUSTOMS, EXCISE AND SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. II APPEAL NO. E/88587, 88588/14-MUM [Arising out of Order-in- Original No. 23-26/CEX/COMMR/2014 dtd. 6/5/2014 passed by the Commissioner of Central Excise & Customs & Service Tax, Aurangabad.] For approval and signature: Honble Mr. P.K. Jain, Member(Technical) Honble Mr Ramesh Nair, Member(Judicial) =======================================================
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 :
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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Aurangabad Electricals Ltd.
:
Appellants
VS
Commissioner of Central Excise, Customs & Service Tax, Aurangabad
:
Respondent
Appearance
Shri. Kiran Sawale, Advocate for the Appellants
Shri. V. K. Agarwal, Addl. Commissioner(A.R.) for the Respondent
CORAM:
Honble Mr. P.K. Jain, Member (Technical)
Honble Mr. Ramesh Nair, Member (Judicial)
Date of hearing: 23/4/2015
Date of decision: /2015
ORDER NO.
Per : Ramesh Nair
This appeal is directed against Order-in- Original No. 23-26/CEX/COMMR/2014 dtd. 6/5/2014 passed by the Commissioner of Central Excise, Customs & Service Tax, Aurangabad, wherein Ld. Commissioner has passed following order:
(i) I confirm demands of Rs.1,59,33,593/- and Rs.2,70,87,131/- against M/s. Aurangabad Electricals Ltd., M/s. Shridhar Metal Works respectively under proviso to Section 11A(1) [existing Section 11A(4)] of the Central Excise Act, 1944.
(ii) I confirm demands of Rs.56,64,235/- and Rs.83,05,124/- against M/s. Aurangabad Electricals Ltd. and M/s. Shridhar Metal Works respectively under Section 11A(1) of the Central Excise Act, 1944.
(iii) I order recovery of interest from both the notices under erstwhile Section 11AB & Section 11AA respectively and Existing Section 11AA of the Central Excise Act, 1944, on the amount as confirmed above.
(iv) I impose penalty equal to the duty involved, for the period upto 7.4.2011 as per two SCNs, both dated 2.5.2013 on M/s. Aurangabad Electricals Ltd. and M/s. Shridhar Metal Works under Section 11AC of the Central Excise Act, 1944. However, such penalty shall be reduced to 25% in terms of Section 11AC(5) of Central Excise Act, 1944 provided the notices pay th amount of duty confirmed with interest and also 25% penalty within 30 days of the receipt of this order.
(v) I impose penalty of 50% of the duty involved for the period from 8.4.2011 onwards on M/s. Aurangabad Electricals Ltd. and M/s. Shridhar Metal Works under Section 11AC(1)(b) of the Central Excise Act, 1944.
(vi) I also impose penalty of Rs.6,00,000/- and Rs.8,00,000/- on M/s. Aurangabad Electricals Ltd. and M/s. Shridhar Metal Works respectively under Rule 25 of the Central Excise Rules, 2002.
In terms of above order, the demand of duty was confirmed against two assessees i.e. present appellant M/s. Aurangabad Electricals Ltd. and other assessee i.e. M/s. Shridhar Metal Works. The present appellant is against confirmation of demand of duty and penalty on the clearance of Aluminium dross, Aluminium turning and Aluminium oily flash cleared to M/s. Shridhar Metal Works. The fact of the case is that the Appellant is manufacturer of Motor Vehicle Aluminium parts. During the manufacturing process, some quantity of Aluminium dross, Aluminum Turning & Aluminium oily flash generates which is given to one M/s. Shridhar Metal Works who converts these waste aluminium material into Aluminium Ingots. M/s. Shridhar Metal Works Metals was given a portion of the factory premises of the Appellant for carrying out such process. The said waste aluminium material is not sold to M/s. Shridhar Metal Works but given freely for carrying out job work. The resultant product on job work i.e. Aluminium Ingots is returned by M/s. Shridar Metal Works within the same factory premises to the Appellant which the Appellant admittedly use the said Ingots in the manufacture of Motor Vehicle Parts. The said Motor vehicle parts are undisputedly cleared on payment of excise duty. The contention of the revenue is that there is removal of said waste aluminum material by the Appellant to a different entity i.e. M/s. Shridhar Metal Works. The waste material is Aluminium Waste and Scrap falling under Chapter Heading No. 76020010 of the Central Excise Tariff Act, 1985 which attracts excise duty. Accordingly demand was confirmed.
2. Shri. Kiran Sawant, Ld Counsel for the appellant submits that the Aluminium dross, Aluminium turning and Aluminium oily flash generated during the course of manufacture of motor vehicle components which was not cleared from their factory premises. In fact the said material was given to one M/s. Shridhar Metal Works within the factory premises and M/s. Shridhar Metals Works carried out process of converting the said aluminium material in the aluminium ingots. The said aluminium ingots were used captively within the same factory of the appellant therefore since goods have not moved from the factory of the appellant and used captively for the manufacture of motor vehicle parts, no duty is liable on such remnant material. He also submits that within the same factory premises of the appellant, part of the premises i.e. located within registered premises was given to M/s. Shridhar Metal Works on leave and licence basis on rent wherein M/s. Shridhar Metal Works has processed remnant material and converted into aluminium ingots and return the aluminium ingots to appellant. In such transaction there is no clearance of the goods out side factory premises of appellant. Since remnant material were used within factory for captive use in the manufacture of other final product i.e. motor vehicle parts which are cleared on payment of duty therefore even if these remnant material are considered as excisable goods the same remains exempted under Notification No. 67/95 CE dated 16/3/1995 hence demand of duty was wrongly confirmed. Without prejudice, he submits that even if the removal of remnant material for job work is considered as removal out side the factory the movement of this remnant material for job work is covered by Rule 4(5) (a) of Cenvat Credit Rules, 2004. It is his submission that on receipt of initial input they have availed Cenvat Credit and after processing the said inputs this remnant material emerged therefore this remnant material is partial processed inputs. Moreover when remnant material is undisputedly meant for use as inputs for further manufacture of ingots and thereafter motor vehicle part, nature of remnant material is nothing but input or partly processed inputs, therefore remnant material is permitted under Rule, 4(5)(a)of Cenvat Credit Rules, 2004 without payment of duty as after job work the ingots are admittedly used in the manufacture of motor vehicle parts. In this support, Ld. Counsel relied upon following judgments.
(a) Wyeth Laboratories Ltd. Vs. Collector of Central Excise, Bombay[2000(120) E.L.T. 218(Tribunal LB)].
(b) Shakti Wire Products Vs. Commissioner of C. Ex. Mumbai-IV[ 2009(241) E.L.T. 223(Tri- Mumbai)]
(d) Jain Metal Component Pvt Ltd. Vs. Commissioner of C. Ex. Jaipur-II[2006(206) E.L.T. 842(Tri-Del)]
(e) Comet Brass Industries Vs. Commissioner of Central Excise, Daman[2005(189) ELT 62(Tri- Mumbai).
He further submits that the demand raised against the appellant is within the normal time period therefore penalty under Section 11AC is not warranted. Ld. Counsel in support of this, relied upon various judgments. Ld. Counsel also submits that the remnant material under question is not excisable goods and therefore not chargeable to excise duty. In this support he placed reliance on following judgments:
(a) Hindalco Industries Limited Vs. Union of India[2014-TIOL-2266-HC-MUM-CX]
(b) Union of India Vs. Indian Aluminium Co.Ltd.[1995(77)E.L.T. 268(S.C.)] He therefore prayed for allowing the appeal.
3. On the other hand, Shri. V. K. Aggarwal Ld. Addl. Commissioner appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that remnant material is aluminium waste and scrap and clearance thereof to different entity considered to be clearance for home consumption therefore it is liable for duty. He also submits that with reference to Rule 4(5)(a) of Cenvat Credit Rules, 2005 regarding clearance of the said goods for job work, firstly it is not input therefore same cannot be cleared under Rule 4(5)(a), secondly appellant has not followed proper procedure. As regard issue whether the material was cleared out side factory or it is used captively, he submits that material was cleared to M/s. Shridhar Metal Works which is an independent entity. M/s. Shridhar Metal Works taken a part of the appellants factory premises on leave and licence agreement on payment of rent consideration. Therefore that particular location can not be considered as part of factory premises of the appellant. On taking part of premises on leave and licence agreement it become manufacturing premises of M/s. Shridhar Metal Works therefore removal of remnant mater to M/s. Shridhar Metal Works is clearly out side the factory premises of the appellant. The process which is carried out by M/s. Shridhar Metal Works is not carried out by the appellant, M/s. Aurangabad but it is carried out by some different entity i.e. M/s. Shridhar Metal Works. With this fact, he submits that removal of remnant material and processing thereof is not under captive consumption therefore removal of remnant material shall attract excise duty. The adjudicating authority has correctly charged excise duty on such remnant material cleared by the appellant to M/s. Shridhar Metal Works.
4. We have carefully considered the submissions made by both sides.
5. As regard issue whether the remnant material cleared by the appellant to M/s. Shridhar Metal Works is clearance for the home consumption and leviable to excise duty or it is captive consumption and exempted under Notification No. 67/95 CE dated 16/3/1995, we observed that a part of the premises of the appellant was given on leave and licence agreement to different entity i.e. M/s. Shridhar Metal Works who is unrelated to the appellant therefore in our view the premises which is used by M/s. Shridhar Metal Works is out side premises of the appellant. Secondly M/s. Shridhar Metal Works is an independent entity who carried out job work on the material supplied by the appellant in such situation M/s. Shridhar Metal Works has independent manufacturer of aluminium ingots therefore removal of remnant material to M/s. Shridhar Metal Works cannot be treated as captive consumption and therefore the same shall not be entitled for exemption under Notification No. 67/95. In various judgment by various forums, view has been taken that if any other person carry out the manufacture, even in the premises of another manufacturer for the purpose of job work basis it cannot be said that job worker is hired labourer therefore job work shall be treated as independent manufacture and not the premises owner, some of the judgment are cited below:-
Hindustan Zinc Ltd. Vs., Commissioner of Central Excise, Jaipur-II[2015(315) E.L.T. 86(Tri-Del.)
6.?The appellant had got the zinc and lead electrodes fabricated through job workers in their own premises out of the raw materials and design supplied by them. Though the job worker had brought their own machinery and appliances and their own workers, the job had been done in the appellants premises and under the appellants supervision. It is seen that in terms of the appellants contract with their job workers, the job workers were to pay the minimum wages to the skilled and unskilled labourers as per the Governments orders and were to comply with the Governments regulations in this regard. In case of injury to any worker in any accident, it is the job workers, who would be liable to pay compensation to the worker and if any compensation is paid by the appellant, the same would be recoverable from the job workers. In terms of the conditions of the contract, the job workers were to ensure the safety of the labour employed by them as provided under the Factories Act. The Commissioner on the basis of the above clauses of the Contract and also the provision in the contract, requiring the job workers to work round the clock, has inferred that the job workers are merely hired labourers of the appellant. In our view, this conclusion of the Commissioner is totally wrong, as from the above clauses of the contract, it cannot be inferred that the job workers were merely hired labourers of the appellant. Moreover, it is not disputed by the department, that in respcct of the identical contracts of the appellants Visakhapattanam unit with its job workers for identical work, the Chennai Bench of the Tribunal vide judgement reported in 2005 (188) E.L.T. 331 has held that the job workers role was much more than mere receiving wages for labour involved in manufacture of Lead and Aluminium Electrodes and, therefore, the job workers cannot be said to be mere hired labourers. Applying the ratio of the Chennai Bench judgement to the facts of this case, we hold that it is the job workers who have to be treated as the manufacturers and, therefore, the duty on Aluminium and lead electrodes got manufactured by them on job work basis cannot be demanded from the appellant by treating them as manufacturers. The impugned orders are set aside. The appeals are allowed.
In view of the above judgment of coordinate bench of this Tribunal it is settled that if job worker is doing job work within the factory premises of the principal with his own capital goods, it is job work and shall be treated as manufacture. In the present case, job worker M/s. Shridhar Metal Works carried out manufacturing process of aluminium ingots in the premises, which was taken on leave and licence basis on consideration of rent, therefore M/s. Shridhar Metal Works is manufacturer on job work basis therefore removal of remnant material by the appellant to M/s. Shridhar Metal Works cannot be considered captive consumption. As regard the issue that even if the removal of remnant material by the appellant to M/s. Shridhar Metal Works is not treated as captive consumption and it is home consumption, whether appellant is required to pay duty on such removal. We are of the view that the removal of remnant material to M/s. Shridhar Metal Works is not sale/purchase transactions but it is on job work basis. This fact is not under dispute that owner ship of remnant material remains with appellant and M/s. Shridhar Metal Works has carried out process of making aluminium ingots is on behalf of the appellant and M/s. Shridhar Metal Works paying only processing charges/labour charges, therefore in this fact, transactions is of job work. It is also fact that remnant material after conversion into aluminium ingots, the ingots is used in the manufacture of motor vehicle parts by the appellant which are admittedly cleared on payment of duty. Remnant is generated during the manufacture of motor vehicle part out of the cenvatable inputs therefore remnant which is squarely meant for use for further production of dutiable goods is in the nature input/partial processed inputs. Therefore removal of such remnant material can be statutorily made in terms of Rule 4(5)(a) of Cenvat Credit Rules, 2004 which is reproduced below:
4. Conditions for allowing CENVAT credit. -
(5) (a) The CENVAT credit shall be allowed even if any inputs or capital goods as such or after being partially processed are sent to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the manufacture of final products or any other purpose, and it is established from the records, challans or memos or any other document produced by the manufacturer or provider of output service taking the CENVAT credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer or provider of output service shall pay an amount equivalent to the CENVAT credit attributable to the inputs or capital goods by debiting the CENVAT credit or otherwise, but the manufacturer or provider of output service can take the CENVAT credit again when the inputs or capital goods are received back in his factory or in the premises of the provider of output service From the above provision, assesse is permitted to remove the inputs for job work. We further note that similar provision is also made under Rule 16(a) of Central Excise Rules, 2002 which is reproduced below:
Removal of goods for job work, etc.?RULE [16A. Any inputs received in a factory may be removed as such or after being partially processed to a job worker for further processing, testing, repair, re-conditioning or any other purpose subject to the fulfilment of conditions specified in this behalf by the Commissioner of Central Excise having jurisdiction.] From the above rule also it is permitted that input can be removed for job work. Even in the job work if the resultant product is returned and used in the manufacture of dutiable goods the said job work is not liable for duty, in terms of notification 214/86-CE dated 25/3/1986. It is observed that in view of Rule 4(5)(a) and Rule 16 (a) of Central Excise Rules, 2002 and Notification No. 214/86 -CE it indicates that intention of the legislator is that if the input whether as such, or partially processed or after processing by the job worker finally used in the final product which is cleared on payment of duty, all these stags of the movement of goods from the raw-material stage up to the final product no duty is leviable. In the present case remnant are at intermediate stage that means initial input on which Cenvat credit is availed has under gone the process of manufacturing and during such process the remnant arose. The said remnant were sent for job work and it converted into aluminium ingots and said resulted ingots were used in the motor vehicle parts which are cleared on payment of duty. In this chain the remnant is an intermediate input therefore movement of such input undoubtedly covered under Rule, 4(5)(a) of Cenvat Credit Rules, 2004 and Rule 16(a) of Cenvat Credit Rules, 2002. Therefore no duty can be demanded on the removal of such remnant material for job work. Very same issue has been decided by the five member larger bench of this tribunal and the same was followed by various subsequent judgments which are cited below:
2000 (120) E.L.T. 218 (Tribunal - LB) WYETH LABORATORIES LTD.
Versus COLLECTOR OF CENTRAL EXCISE, BOMBAY
3.After considering the submissions made by both? sides and the materials on records it is found :-
Rule 57 F(2) reads as follows :?(a) (2) Notwithstanding anything contained in sub-rule (1), a manufacturer may, with the permission of the Collector of Central Excise and subject to such terms and conditions and limitations as he may impose, remove the inputs as such, or after the inputs have been partially processed during the course of manufacture of final products to a place outside the factory :
for the purposes of test, repairs, refining, reconditioning or carrying out any other operation necessary for the manufacture of the final product or remove the same without payment of duty under the bond for export, and return the same to his factory for further use in the manufacture of the final product, provided that the waste, if any, arising in the course of such operation is also returned to the said factory;
(b) for the purpose of manufacture of intermediate products necessary for the manufacture of final products and return the said intermediate products to his factory for further use in the manufacture of the final product or remove the same without payment of duty under bond for export, provided that the waste, if any, arising in the course of manufacture of such intermediate products is also returned to the said factory."
and Rule 57(4) reads as follows :-
(4) Any waste, arising from the processing of inputs, in respect of which credit has been taken may.... Rule 57D of the Modvat Rules specifies that credit allowed in respect of inputs shall not be denied or allowed on the part of the inputs contained in any waste or refuse or by-product arising during the manufacture.
Words used in these Modvat Rules, like repairing,?(b) rejoining, reconditioning, waste, refuse, by-product, are not defined in the Rules.
Reading of these Rules 57D, 57F(2), 57F(4) in the light?(c) of common understanding of the words would indicate, that inputs in their course of conversion, or when used in or in relation to the manufacture of the final products, may require reprocessing, reconditioning or any other further processing and due to such partial and final processing can undergo and result in any stage of intermediate goods, by-products; refuse or/and waste.
Commercial prudence and technological feasibility would?(c) induce a manufacturer to reconvert, reprocess, recondition and otherwise deal with intermediate goods, by-products, scrap, refuse, waste etc. to obtain maximum targeted production of the final product by utilising 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. In this view the word "waste" used in rule 57F(4) has to be understood to denote a form of inputs, after partial, full or reprocessing which could not in a technological/commercially feasible manner be converted to a final product or desired to be converted further. Thus what would be 'waste' for a manufacturer, may not be a waste' in the case of another manufacturer, even in the case of same kind of goods. It is significant to note, that while Rule 57D talks of three stages i.e. waste, Refuse or by- product, Rule 57F(4) only talks of waste. Therefore, it appears, that the framers of the rules have used the word 'waste' in Rule 57F(4) to be understood in a limited fashion; this has 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.
Once we give such a meaning to the word 'waste'?(e) occurring in Rule 57F(4), then inputs, semi-processed, fully processed or converted into any other stage or further form, called by any name, would be covered by the provisions of the Rule 57F(2) used, inside or outside the Modvat credit availers facilities i.e. on job work, provided job work procedures are followed, such movements would be permissible as long as the manufacturer availing the Modvat desires. Rule 57F(2) proviso itself provides that whatever cannot be processed any further on job work, under Rule 57F(2) would be 'waste'. Such waste would thereafter be dealt with as provided by Rule 57F(4). The rules do not impede the desire of the manufacturer to extract as much final product out of the inputs under Rule 57F(2) as possible or desired. The procedures under Rule could be 'aborted' and recourse taken to Rule 57F(4) at a stage, but only at the option of the assessee. The option to exercise the routes available between 57F(2) and 57F(4) procedures remains with the manufacturer and is not lost by a change in form of the input, due to processing.
We, therefore, cannot find any reason to deny the?(f) facility of Rule 57F(2) for 'spent catalyst' which are recharged by re-processing/re-conditioning them further. The following grounds as found by the Commissioner (Appeals) in his order in the case of M/s. Wyeth Laboratories Ltd.
......The catalyst was used in the process but was not itself subjected to any such process. It was a result of process of raw materials that the catalyst became spent and could not be used further. Therefore, in the manufacturing activity under consideration, catalyst was not subject to any process and could not be said to have been processed in the catalyst was the subject of the manufacturing process. are not correct. As we find that a catalyst is entitled for input credit under Rule 57A, as no distinctions are made in the Modvat rules between input catalyst or input raw material, no limitations on desire of the assessees of the catalyst under Rule 57F(2) are called for by invoking the route of Rule 57F(4). A catalyst, by its very nature would be subjected to a process or assist in the processing of goods and would get consumed or by its very nature require reconditioning.
When we do not find any provisions of law to impede and?(g) raise duty liability at any stage on the assessees efforts/desire to use the inputs in or in relation to the manufacture of the final products. Therefore, Rule 57F(4) 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.
13.Admitted position is that in the instant case? waste has been used for re-melting purposes and was not used as such and, therefore was classifiable under heading 72.04.
14.Now let me examine the provisions of the? relevant Rules. Most important question now is whether it will be covered by Rule 57F(2) or Rule 57F(4) of the Central Excise Rules, 1944. Rule 57F(2) has been tracted in the proposed order by my learned brother. Rule 57F(2) permits the manufacturer to remove with the permission of the Collector of Central Excise inputs as such, or after inputs have been partially processed during the course of manufacture of final product at a place outside for the purpose of repairs, refining, reconditioning or carry out any other operation necessary for the final product for the purpose of manufacture of intermediate product necessary for manufacture of final product. Rule 57F(2) provides for removal of inputs as such or after the inputs have been partially processed for purpose of manufacture of intermediate products necessary for manufacture of final product. In the instant case ingot is the input. It is processed. On processing two distinct things emerge. One is termed semi-processed ingot and the second is waste. Semi processed ingots are subjected to further processing to obtain the intermediate product for manufacture of final product. In sub-rule (2) of Rule 57F, the specific requirement is that the inputs are removed as such or partially processed. Examining 'waste' in the light of the above, we find that the inputs on which Modvat credit has been taken is ingots, therefore, the waste is not input as such, therefore, the second issue arises whether it is partially processed input. Now, whether the waste can be called partially processed input or not is the pertinent question which needs to be examined and replied. A partially processed input will be that input which is subjected to further processing for obtaining the final product and not the input. Waste cannot be termed as partially processed input as it cannot be subjected to obtaining intermediate product or final product. It can be used only for re-melting to obtain ingots and thus cannot be termed as partially processed inputs.
2009 (241) E.L.T. 223 (Tri. Mumbai) SHAKTI WIRE PRODUCTS Versus COMMISSIONER OF C. EX., MUMBAI-V
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.
11.The Tribunal? in the case of Narmada Plastics (P) Ltd. v. 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. v. 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) E.L.T. 222 (S.C.) and M/s. Elphinstone Metal Rolling Mills - 2004 (167) E.L.T. 481 (S.C.) which has got not 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 the 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 assessee, and the case of Elphinstone Metal Rolling Mills is regarding the applicability of the exemption Notification Nos. 74/65-C.E./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.
2006 (206) E.L.T. 842 (Tri. - Del.) JAIN METAL COMPONENTS PVT. LTD.
Versus COMMR. OF C. EX., JAIPUR-II
2.?Brief facts of the case are that the appellants are engaged in the manufacture of Brass Components from Brass Rods. During the manufacture of brass components, brass boring emerged as waste. The appellants were clearing the brass waste and scrap without payment of duty for job work under the cover of challans for getting the waste remelted and reconverted into brass rods and were receiving back the brass rods which were used as inputs for the manufacture of their final product i.e. brass components.
3.?The case of the Revenue is that the appellant wrongly followed the procedure under Rule 57AC of Central Excise Rules as this Rule provides that manufacturer can remove any inputs or capital goods as such to the job worker for further processing, testing, repairing, reconditioning or any other purpose. The case of the Revenue is that as the brass waste and scrap is not input, therefore, the appellant has to pay the duty on the brass waste and scrap.
4.?We find that this issue is covered by the decision of the Larger Bench of this Tribunal in the case of Wyeth Laboratories Ltd. v. CCE reported in 2000 (120) E.L.T. 218. In this case the Tribunal held as under:
3(c) commercial prudence and technological feasibility would induce a manufacturer to reconvert, reprocess, recondition and otherwise deal with intermediate goods, by-produces, scrap, refuse, waste etc. to obtain maximum targeted production of the final product by utilising 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. In this view the word waste used in rule 57F (4) has to be understood to denote a form of inputs, after partial, full or reprocessing which could not in a technological/commercially feasible manner be converted to a final product or desired to be converted further. Thus what would be waste for a manufacturer, may not be a waste in the case of another manufacturer, even in the case of same kind of goods. It is significant to note, that while Rule 57D talks of three tages i.e. waste, Refuse or by-product, Rule 57F(4) only talks of waste. Therefore, it appears, that the framers of the rules have used the word waste in Rule 57F(4) to be understood in a limited fashion; this has 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.
5.?In view of the above decision of this Tribunal, the impugned order is set aside and the appeal is allowed.
2005 (189) E.L.T. 62 (Tri. - Mumbai) COMET BRASS INDUSTRIES Versus COMMISSIONER OF CENTRAL EXCISE, DAMAN
3. In view of? the law declared by the Larger Bench, Commissioner order is set aside and appeal is allowed with consequential relief to the appellant. Stay petition also gets disposed off.
From the above judgments, it is well settled that the waste generated during the course of manufacture of final product, can be sent without payment of duty for melting to the job worker and thereafter the same is used for manufacture of dutiable goods. In view of our discussion which is based upon various judgments discussed above we are of the considered view that the removal of remnant by appellant to the job worker is not liable to duty and the adjudicating authority has wrongly confirmed the duty demand and imposed penalties. Since, we have taken view that the removal of remnant is not dutiable, we are not going into aspect of excisability of said remnant material with reference to judgments in case of Indian Aluminium Co. Ltd and Hindalco Industries Limited(supra). In view of above discussion and judgments we are of the considered view that demand of duty on clearance of remnant is not sustainable. Appeals are allowed with consequential relief, if any, in accordance with law.
(Order pronounced in court on _____________) P.K. Jain Member (Technical) Ramesh Nair Member (Judicial) sk 2