2023 (4) TMI 1267 - AT - Central Excise

CENVAT Credit - intermediate products at the hands of the job worker - requirement of adding the value of scrap - burden of discharging duty liability of the processed goods - scrap retained by the job-worker should be included in the assessable value of the processed goods - HELD THAT - The issue involved in the present case has been settled in the appellants own case for the period from April 2007 to December 2010 in M/S SHILPA STEEL POWER LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE NAGPUR 2014 (12) TMI 945 - CESTAT MUMBAI where it was held that the appellant has discharged the duty liability on the scrap which has been generated and the transaction could have been undertaken under Rule 4(5)(a) of the Cenvat Credit Rules. If the appellant had followed the said procedure instead of paying duty the question of inclusion or exclusion of value of the scrap would not have arisen at all. In these circumstances the question of addition to value of scrap is not sustainable. There are no merits in the impugned order - appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are the treatment of scrap retained by a job-worker in the assessable value of processed goods and the duty liability of processed goods when the job-worker does not follow the prescribed procedure under the Cenvat Credit Rules, 2004.

Treatment of scrap in assessable value:
The Tribunal held that when the job-worker and the manufacturer follow the procedure under Rule 4(5)(a) of the Cenvat Credit Rules, 2004, the intermediate products at the hands of the job-worker are not liable to duty. In such cases, the value of scrap does not need to be added to the assessable value of the processed goods. This was supported by the apex court decision in the case of International Auto Ltd.

Duty liability of processed goods:
However, in cases where the job-worker is responsible for discharging duty liability of the processed goods because they are not following the prescribed procedure, the processed goods should be treated as final products for duty purposes. The duty liability of such processed goods is to be discharged by the job-worker, not the Principal manufacturer. The decisions in the cases of General Engineering Works and Lloyds Steel Industries serve as guidelines for determining the correct assessable value of such goods.

Appellant's case:
The appellant in this case manufactured rolled products on a job work basis for various customers. The Revenue contended that the scrap retained by the appellants should have been included in the job work charges and the value of the scrap should be added to the job charges. A show cause notice was issued to the appellant, leading to the impugned order which was upheld by the Tribunal.

Previous decisions and conclusion:
The Tribunal considered previous decisions in the appellant's own case for a specific period and found that the demand for including the value of scrap was not sustainable. The Tribunal also referred to a similar view held in the case of P. R. Rolling Mills Ltd. Consequently, the Tribunal allowed the appeal, setting aside the impugned order.

This judgment clarifies the treatment of scrap in the assessable value of processed goods and the duty liability of processed goods when the job-worker does not follow the prescribed procedure under the Cenvat Credit Rules, 2004.