2013 (10) TMI 840 - AT - Central Excise

CENVAT Credit - Waiver of Pre-deposit - Rule 4(5)(a) of the CENVAT Credit Rules, 2004 nowhere envisages that the waste and scrap generated at the job-worker s premises should be brought back by the supplier and if they are not brought back, the supplier of raw material is liable to discharge excise duty liability - What is envisaged is that the raw material sent for processing at the job-worker s end, the processed goods should be brought back and if they are not so brought back, the appellant has to reverse the credit taken on the raw materials supplied. Following Commissioner of Central Excise vs. Rocket Engineering Corporation Ltd. 2006 (6) TMI 66 - HIGH COURT BOMBAY - The liability to pay excise duty arises not under the provisions of Rule 4(5)(a) of the CENVAT Credit Rules, 2004 but under Section3 of the Central Excise Act, 1944 on the manufacture of a marketable commodity as specified in the Central Excise Tariff Act - when the waste and scrap has arisen in the job-worker s premises, the job-worker is the manufacturer of waste and scrap so generated and not the appellant, who is the supplier of the raw material - the appellant has made out a strong case in their favour for grant of stay - unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery during the pendency of the appeal Stay granted.

Summary

Issues:
1. Liability of principal manufacturer for excise duty on waste and scrap generated at job-workers' premises.

Analysis:

Issue 1: Liability of principal manufacturer for excise duty on waste and scrap generated at job-workers' premises

The case involved the appellant, a manufacturer of motor vehicle parts, who sent raw materials to job workers for further processing. Waste and scrap arose at the job workers' premises, leading to a demand for excise duty on the appellant. The appellant contended that they were not responsible for duty on waste and scrap generated by job workers. The adjudicating authority and appellate authority upheld the duty demand. The appellant argued that as per Rule 4(5)(a) of the CENVAT Credit Rules, 2004, the job worker should discharge excise duty on waste and scrap. They cited precedents where it was held that the supplier of inputs is not liable for duty on waste and scrap generated at job workers' premises. The Tribunal noted that Rule 4(5)(a) does not impose duty on waste and scrap generated at job workers' premises but on the manufacture of marketable commodities. It ruled that the job worker, not the appellant, is the manufacturer of waste and scrap. Citing previous tribunal decisions and High Court rulings, the Tribunal granted the appellant a waiver from pre-deposit of dues and stayed recovery during the appeal, acknowledging the strong case made by the appellant.

This judgment clarifies the distinction between the liability of the principal manufacturer and the job worker for excise duty on waste and scrap generated during processing. It emphasizes that the duty liability arises on the manufacture of marketable commodities and not on waste and scrap specifically. The ruling provides guidance based on legal provisions and precedents, ensuring a fair interpretation of the law in similar cases.