2023 (3) TMI 1401 - AT - Central Excise

Liability of Central Excise duty - scrap generated in the manufacturing process at the job worker's premises should be paid by the principal manufacturer or not - Rule 4(5)(a) of Cenvat Credit Rules, 2004 - HELD THAT - There are force in the submission of the appellants that Rule 4(5)(a) of the Cenvat Credit Rules, 2002 does not cover the return of waste and scraps. Vide COMMISSIONER OF CGST BHIWANDI VERSUS VE COMMERCIAL VEHICLES LTD 2018 (5) TMI 1050 - CESTAT MUMBAI , in case of the sister unit of the appellant tribunal held that the appellants were not liable to discharge duty on waste and scrap generated at job worker's end. There are no merits in the impugned order - appeal allowed.

Summary

Issues Involved:
1. Liability of the principal manufacturer to pay Central Excise duty on scrap generated at the job worker's premises.
2. Applicability of Rule 4(5)(a) and Rule 4(6) of Cenvat Credit Rules, 2004.
3. Invocation of proviso to Section 11A(1) of Central Excise Act, 1944, interest u/s 11AB, and penalty u/s 11AC.

Summary:

1. Liability of the Principal Manufacturer:
The main issue was whether the principal manufacturer is liable to pay Central Excise duty on the scrap generated at the job worker's premises. The Tribunal held that the scrap generated during the manufacturing process at the job worker's premises is excisable and classifiable under Chapter Heading 7204 1000 of the Central Excise Tariff Act, 1985. The principal manufacturer, having availed Cenvat credit on the inputs, is liable to pay duty on such scrap, irrespective of whether it was generated within its own factory or at the job worker's premises.

2. Applicability of Rule 4(5)(a) and Rule 4(6) of Cenvat Credit Rules, 2004:
The Tribunal noted that Rule 4(5)(a) allows the removal of inputs for further processing without payment of duty, provided the final product is charged to duty. Rule 4(6) permits the clearance of goods from the job worker's premises on payment of duty. The Tribunal emphasized that the liability to pay duty does not cease merely because the scrap is not brought back to the manufacturer's premises. The principal manufacturer must either bring back the scrap or clear it from the job worker's premises on payment of duty.

3. Invocation of Proviso to Section 11A(1), Interest u/s 11AB, and Penalty u/s 11AC:
The Tribunal found that the principal manufacturer had suppressed the facts regarding the disposal of scrap, as they neither disclosed the quantum and price of the scrap in their returns nor paid the duty on it. This suppression warranted the invocation of the proviso to Section 11A(1) of the Central Excise Act, 1944, along with interest u/s 11AB and penalty u/s 11AC. Consequently, the Tribunal allowed the Revenue's appeal, set aside the lower authority's order, and confirmed the demand along with the penalty and interest.

Reference to Case Laws and Precedents:
The Tribunal referred to several case laws, including Rocket Engineering Corporation Ltd. vs. CCE, Preetam Enterprises vs. Commissioner of Central Excise, and others, which supported the view that the principal manufacturer is not liable to pay duty on scrap generated at the job worker's end. However, the Tribunal distinguished these cases based on the specific facts and provisions applicable in the present case.

Conclusion:
The Tribunal concluded that the principal manufacturer is liable to pay duty on the scrap generated at the job worker's premises, upheld the demand, and imposed penalties and interest as per the provisions of the Central Excise Act, 1944. The appeal was allowed in favor of the Revenue, and the impugned order of the lower authority was set aside.