2011 (7) TMI 546 - AT - Central Excise

Dutiability of Waste and scrap - Manufacturer of Electric accumulators(automobile batteries) - respondents were receiving rejected batteries from their customers under the warranty claim & the same were being sent to their smelter job worker for separation of plastic container and lead materials and refining of lead contents contained in the said batteries under the cover of job work challans - SCN issued proposing confirmation of demand of duty leviable in respect of plastic containers and lead scrap generated in the job worker s factory and not returned by them to the respondent - Held that - Cenvat Credit Rules are silent on disposal of waste & scrap - Following the decision of International Tobacco Company Ltd. 2003 (10) TMI 171 - CESTAT, NEW DELHI since job worker is the manufacturer of such scrap, the demand & penalty on the appellants on this score cannot be sustained - Decided in favour of assessee. Duty confirmation on the lead scrap sent to the job worker for conversion into lead ingots - The appellate authority has relied upon the case of Wyeth Laboratories Ltd. Vs. CCE 2000 (7) TMI 109 - CEGAT, NEW DELHI wherein it was held that the scrap generated in the manufacturer s factory can be sent to the job worker for carrying out the processes in terms of the Erstwhile Provisions of Rule 57F (4) - Decided in favour of assessee.

Summary

Issues Involved:
- Duty on plastic containers and lead scrap not returned by job workers
- Duty on lead scrap cleared for conversion into lead ingots
- Appeal against the order passed by Commissioner (Appeals)

Issue 1: Duty on plastic containers and lead scrap not returned by job workers

The respondents, engaged in manufacturing automobile batteries, were availing cenvat credit and receiving rejected batteries for remaking under specific rules. The rejected batteries were sent to a job worker for separation of materials, with lead contents being retrieved. However, the plastic containers and top lead scrap were not returned by the job workers. A show cause notice was issued demanding duty on the unreturned materials. The original adjudicating authority confirmed the demand, but the Commissioner (Appeals) set it aside. The Commissioner observed that the waste and scrap arising during the manufacturing process could not be charged to excise duty. Citing legal precedents, the Commissioner held that the waste and scrap sold by the job worker could not be considered manufactured waste and scrap. The Cenvat Credit Rules did not mandate the return of waste and scrap, especially when the job worker was the manufacturer of such scrap. The demand for duty on the unreturned materials was set aside.

Issue 2: Duty on lead scrap cleared for conversion into lead ingots

Another aspect of the case involved lead scrap generated in the respondent's factory during the manufacture of batteries, which was cleared to job workers for conversion into lead ingots. The show cause notice proposed duty on this lead scrap. The original adjudicating authority confirmed the demand, but the Commissioner (Appeals) set it aside. The appellate authority relied on a Tribunal decision stating that scrap generated in the manufacturer's factory could be sent to job workers for processing. The Revenue reiterated the reasons for the duty demand, arguing that all goods generated at the job worker's factory should be returned. However, the Commissioner (Appeals) had already determined that no excisable goods emerged from the scrap generated at the job worker's premises. The Tribunal found no grounds to challenge the Commissioner's findings and rejected the appeal filed by the Revenue.

Issue 3: Appeal against the order passed by Commissioner (Appeals)

The Revenue appealed against the Commissioner (Appeals)'s order, reiterating the duty demands on both the unreturned materials and the lead scrap sent for conversion. However, the Tribunal upheld the Commissioner's findings, emphasizing that the waste and scrap generated did not result in excisable goods. The Tribunal also noted that the Commissioner had dealt with the issues extensively, following legal precedents and arriving at justifiable conclusions. As the Revenue failed to provide grounds to challenge the Commissioner's decision, the appeal was rejected.

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