2013 (11) TMI 1202 - AT - Central Excise

Waste and scrap retained by Job worker - Waiver of Pre-deposit of duty and penalty u/s 11AC of CE Act 1944 Held that - Following Alucast Foundries Pvt. Ltd. Vs. CCE, Mangalore 2008 (6) TMI 511 - CESTAT, BANGALORE - The job-worker had returned the processed material to the applicant but retained the waste and scrap arose during the said process - The value of the waste and scrap was given to the manufacturer by issuing credit notes - The job-worker had undertaken to discharge the appropriate excise duty on clearance of such waste and scrap from his premises - The duty liability on waste and scrap generated during the process, is only on the job worker Prima Facie the appellant could able to make a prima facie case for waiver of pre-deposit of dues stay granted

Summary

Issues involved:
1. Waiver of pre-deposit of duty and penalty under Section 11AC of Central Excise Act, 1944.

Analysis:
1. The appellant sought waiver of pre-deposit of duty and penalty imposed under the Central Excise Act, 1944. The appellant argued that they had removed inputs for conversion into finished items, resulting in the generation of scrap. The job worker issued credit notes for the scrap but retained it in their premises. The appellant contended that the duty liability on the waste and scrap rested with the job worker, not them. Citing various judgments, the appellant claimed that the department wrongly demanded excise duty on the retained scrap. The Tribunal found merit in the appellant's argument, noting that the job worker had agreed to pay the appropriate excise duty upon clearing the waste and scrap. Consequently, the Tribunal granted a waiver of pre-deposit of dues adjudged and stayed the recovery during the appeal process.

2. The Revenue's authorized representative reiterated the findings of the Commissioner (Appeals) and argued that the principles from the cited judgments were not applicable to the present case. However, the Tribunal, after hearing both sides and examining the records, concluded that the duty liability for waste and scrap generated during the conversion process lay with the job worker. The Tribunal upheld the appellant's contention that they had made a prima facie case for the waiver of pre-deposit of dues adjudged. As a result, the Tribunal allowed the stay petition and waived all dues adjudged, with recovery stayed during the pendency of the appeal.

This judgment by the Appellate Tribunal CESTAT Bangalore highlights the importance of clarifying duty liabilities on waste and scrap generated during manufacturing processes, emphasizing the responsibility of the job worker in such scenarios. The decision provides clarity on the waiver of pre-deposit of duty and penalty under the Central Excise Act, 1944, based on the specific circumstances and agreements between the parties involved in the production chain.