2005 (7) TMI 447 - AT - Central Excise

Summary

Issues:
1. Applicability of Rule 57F(4) regarding waste and scrap arising from job work.
2. Liability of duty on dross, ash, and residues generated during manufacturing.
3. Imposition of penalties under Section 11AC, Rule 173Q, and Rule 209A on company officials.

Analysis:
1. The appellant, a motor vehicle manufacturer, availed Modvat credit on inputs like Aluminium Ingots, cleared under Rule 57F(4) for job work. Discrepancies arose as the weight of received castings did not match the weight of ingots sent due to unaccounted waste and scrap. The department alleged duty evasion on the waste and scrap, emphasizing the obligation to account for such materials under Rule 57F(4). The appellant argued that only dross, ash, and residues were generated, not waste and scrap, hence no duty was due on these items. However, the Tribunal held that any material arising from inputs during job work, including dross and residues, must be considered for duty payment to prevent duty evasion, rejecting the appellant's distinction.

2. Under the Modvat scheme, the appellant was required to receive back both inputs and any resulting product, including waste and scrap, arising from job work. The failure to demonstrate duty payment on dross, ash, and residues led to the demand for duty, invoking a longer limitation period due to non-disclosure by the appellant. The Tribunal emphasized the sender's responsibility to fully account for sent inputs and their by-products, dismissing the argument that the job worker should bear duty liability for dross, ash, and residues. The Tribunal upheld the duty demand on these materials, citing the appellant's non-compliance with disclosure requirements.

3. Penalties were imposed under Section 11AC on the company for non-compliance, reduced to Rs. 3 lakhs considering the circumstances. Penalties under Rule 173Q and Rule 209A on certain company officials were reviewed. The Tribunal set aside the penalty on the Vice President, finding no evidence of involvement in the waste and scrap issue. The penalty on the Senior Manager (internal audit) was also revoked, deeming it unjustified. However, a penalty of Rs. 1,000 was upheld on the operational Manager due to involvement in daily transactions. The Tribunal maintained the interest liability as ordered by the Commissioner, concluding the appeals with specific penalty adjustments for different officials based on their roles and responsibilities within the company.