2015 (2) TMI 703 - AT - Central Excise

Job work - Reversal of Cenvat credit related to inputs contained in waste and scraps - Not received from Job workers - Held that - Waste and scrap are not manufactured goods whether they are generated at the premises of the principal manufacturer or at the premises of job-worker and accordingly, the legislature have consciously not made any provisions for reversal of any credit taken on duty paid inputs in case of clearance of waste and scrap and/or, there non-return from the job worker s premises under the Central Excise Rules, 2002 read with Cenvat Credit Rules, 2002/2004.Decided in favour of appellant.

Summary

Issues:
- Reversal of CENVAT Credit for waste and scraps not received from job-worker.

Detailed Analysis:

Issue 1: Reversal of CENVAT Credit
The appeal concerned whether CENVAT Credit attributable to waste and scraps, not received back from job-workers, should be reversed. The appellant, engaged in manufacturing excisable goods, sent semi-processed inputs to job-workers for further processing. Revenue alleged shortages in the quantity of processed inputs returned by job-workers, leading to a show-cause notice. The appellant argued that under Cenvat Credit Rules, there was no obligation to return waste and scrap generated at job-workers' premises. The Order-in-Original upheld the demand for reversal of CENVAT Credit, citing Rule 4(5)(a) of Cenvat Credit Rules. The Commissioner (Appeals) affirmed the decision, reducing the penalty due to lack of fraud. The appellant contended that the pre-2000 rules required waste and scrap to be returned, unlike the current rules. The appellant relied on a Board Circular stating that credit should not be denied for waste and scrap. The appellant also cited tribunal rulings supporting their position.

Issue 2: Interpretation of Rules
The appellant argued that waste and scrap, whether generated at the principal manufacturer's premises or job-worker's premises, did not require credit reversal under the Central Excise Rules and Cenvat Credit Rules. The appellant highlighted that the legislation intentionally omitted provisions for waste and scrap return in the new rules. The appellant referenced a clarificatory circular emphasizing that credit should not be denied for inputs in waste and scrap. Tribunal rulings in similar cases were cited to support the appellant's stance. The Revenue relied on a previous tribunal decision imposing duty liability on the principal manufacturer for waste and scrap generated at job-worker's premises. The Revenue contended that Rule 4(6) of Cenvat Credit Rules allowed imposing conditions for duty payment. The Commissioner prescribed the duty liability discharge manner in a Trade Notice, holding the principal manufacturer responsible for duty on waste and scrap not returned.

Conclusion
The Tribunal held that waste and scrap, whether from the principal manufacturer's premises or job-worker's premises, did not require credit reversal under the Central Excise Rules and Cenvat Credit Rules. The legislation did not include provisions for credit reversal in such cases. The Tribunal overturned the impugned order, ruling in favor of the appellant and granting consequential benefits. The judgment emphasized that waste and scrap were not manufactured goods, and no provisions existed for credit reversal in the given scenario.