2013 (11) TMI 1128 - AT - Central Excise

Demand on the value of waste and scrap cleared by job worker Invocation of Notification No. 214/86-CE or Rule 16A of the Central Excise Rules Waiver of Pre-deposit Held that - Prima facie, the job worker has paid the duty on the materials - there is no requirement of invoking Notification No. 214/86-CE or Rule 16A of the Central Excise Rules - the applicants have made out a prima facie case for waiver of entire amount of duty, interest and penalty Pre-deposits waived till the disposal Stay granted.

Summary

Issues involved:
- Duty demand on waste and scrap cleared to job worker
- Eligibility for benefit of Notification No. 214/86-CE
- Inclusion of clearance value of waste and scrap in final product's clearance value

Analysis:
The judgment by the Appellate Tribunal CESTAT Chennai pertains to three applications with a common issue, consolidated for disposal. The case involves the manufacture of TNEB lining materials, where waste and scrap generated during production were sent to a job worker for conversion. The job worker returned fully manufactured goods to the applicant after conversion, paying duty on MS angles and MS channels. The Revenue raised a demand on the value of waste and scrap cleared to the job worker, along with penalties and interest.

Upon hearing both sides and examining the records, the Tribunal noted the main contentions. Firstly, the goods were cleared without following the procedure under Rule 16A of the Central Excise Rules, 2002. Secondly, the eligibility for the benefit of Notification No. 214/86-CE was questioned as the job worker had already paid the duty. Lastly, the issue of whether the clearance value of waste and scrap should be included in the final product's clearance value was raised. The Tribunal observed that the job worker had indeed paid the duty on the materials, making the invocation of Notification No. 214/86-CE or Rule 16A unnecessary. Additionally, it was not established that the clearance value of the job work material would impact the total clearance value of the finished goods.

Consequently, the Tribunal found that the applicants had made a prima facie case for the waiver of the entire amount of duty, interest, and penalty. As a result, the Tribunal granted a waiver of pre-deposit of duty, interest, and penalty, staying the recovery during the pendency of the appeals. The judgment was dictated and pronounced in open court by P.K. Das.