2017 (3) TMI 1442 - AT - Central Excise

Valuation - scrap - job-work - scrap retained by appellant, who is a job-worker, to be included in assessable value or not? - appellant clears the scrap so retained by them and discharges the duty liability on it - Held that - the appellant has paid duty on the value of scrap retained by them, therefore, the decision of the Ad-Manum Packaging Ltd. 2016 (9) TMI 630 - CESTAT NEW DELHI is squarely applicable to the facts of this case, where it was held that the appellant has discharged the duty liability on the scrap and again, demanded duty by including the value in job work charges, which will amount to double taxation - In that circumstances, the value of scrap retained by the appellant is not includible in the assessable value of the said goods. Otherwise it will amount to double taxation - appeal allowed - decided in favor of appellant.

Summary

Issues:
Demand of Central Excise Duty on scrap retained by the appellant in job work basis.

Analysis:
The appellant, engaged in manufacturing Forging & Tractor parts, filed a refund claim due to excess duty paid on goods cleared on job work basis. The issue arose when it was observed that scrap generated during job work was retained by the appellant and cleared on payment of duty. The authorities proposed to demand duty on the value of scrap retained, alleging it should have been included in the assessable value of goods manufactured on job work basis. The appellant contended that they cleared the scrap on payment of duty, citing precedents where demanding duty on scrap retained led to double taxation. The Tribunal examined various decisions, including Jay Engineering Works Ltd., Campco Chocolate Factory, and Ad-Manum Packaging Ltd., to determine the inclusion of scrap value in assessable value. The Tribunal found that since the appellant had already paid duty on the scrap retained, including its value in the assessable value would result in double taxation. Therefore, the Tribunal set aside the impugned order, allowing the appeal with consequential relief.

This case highlights the crucial issue of whether the value of scrap retained by a job worker should be included in the assessable value of goods manufactured on job work basis for the purpose of Central Excise Duty. The Tribunal analyzed precedents and established that demanding duty on scrap value retained by the appellant, who had already paid duty on the scrap, would amount to double taxation. This decision aligns with the principle of avoiding double taxation and ensures a fair application of Central Excise laws.

The appellant's argument that they had paid duty on the scrap retained and demanding duty again would lead to double taxation was supported by the Tribunal's examination of relevant case laws. The Tribunal emphasized the importance of not including the value of scrap in the assessable value of goods job worked to prevent unjust enrichment and ensure a balanced application of taxation laws. By considering the appellant's compliance with duty payment on the scrap, the Tribunal upheld the principle of fairness and avoided imposing additional tax burdens on the appellant.

The Tribunal's decision in this case provides clarity on the treatment of scrap value in the assessment of Central Excise Duty for job workers. By setting aside the demand for duty on scrap retained by the appellant, the Tribunal upheld the principle of avoiding double taxation and ensuring that duty is levied appropriately. This judgment serves as a significant precedent in determining the assessable value of goods manufactured on job work basis, particularly concerning the treatment of scrap generated during the manufacturing process.