2017 (6) TMI 800 - AT - Central Excise

Wast and scrap - job-work - includibility - demand on the ground that assessee had not included the value of unreturned scrap generated on account of the job work in the assessable value, worked out on cost construction method - Held that - the value of scrap not includable in assessable value - reliance was placed in the decision of the apex court in the case of Commissioner Versus P.R. Rolling Mills Pvt. Ltd. 2010 (9) TMI 1072 - SUPREME COURT - appeal dismissed - decided against Revenue.

Issues:
- Appeal against the order passed by the Commissioner(Appeals) allowing the respondent's appeal and setting aside the Order-in-Original.
- Inclusion of value of unreturned scrap generated during job work in the assessable value.
- Allegation of contravention of Central Excise Rules 2001 and 2002.
- Demand of duty amount and imposition of penalty.
- Interpretation of Standard Principles of Costing.
- Application of relevant case laws.
- Validity of impugned order by the Commissioner(Appeals).

Issue 1: Appeal against the Commissioner(Appeals) order:
The Department filed an appeal against the order passed by the Commissioner(Appeals) allowing the respondent's appeal and setting aside the Order-in-Original. The Department contended that the impugned order was contrary to the law and not sustainable. They argued that the value of the scrap generated during the manufacture of finished goods and sold by the job worker should be included in the assessable value of the finished goods. The Department also challenged the reliance placed by the Commissioner(Appeals) on specific case laws, arguing that the full conversion charges should be loaded on the costing of raw material at the job worker's end to determine the correct assessable value.

Issue 2: Inclusion of unreturned scrap in assessable value:
The Department alleged that the respondent had not included the value of unreturned scrap generated during job work in the assessable value, as required by Central Excise Rules 2001 and 2002. They argued that the sale proceeds of the scrap should be considered as an additional charge includable in the assessable value. A duty amount was demanded based on this omission, and a penalty was also proposed. The Department emphasized that deducting the portion of scrap credit from the assessable value would result in the non-inclusion of total conversion charges in the assessable value.

Issue 3: Interpretation of Standard Principles of Costing:
The respondent, on the other hand, defended the impugned order, asserting that the value of scrap generated during job work should be reduced from the raw material in accordance with the Standard Principles of Costing. They relied on previous Tribunal decisions to support their argument that the value of scrap should not be included in the assessable value of the products manufactured. The respondent cited a specific case where the Tribunal held that if intermediary products are not liable to duty at the hands of the job worker, the value of scrap does not need to be included in the assessable value.

Issue 4: Application of relevant case laws:
The respondent further supported their position by referring to a decision where the Tribunal's ruling was upheld by the Supreme Court. They highlighted that the Supreme Court dismissed the Revenue's appeal on merit, reinforcing the Tribunal's decision that the value of scrap need not be included in the assessable value of products manufactured by the appellant. The respondent argued that the decision of the Tribunal, upheld by the Apex Court, provided a strong precedent for their case.

Issue 5: Validity of impugned order by the Commissioner(Appeals):
After hearing both parties and examining the records, the Tribunal upheld the impugned order passed by the Commissioner(Appeals). The Tribunal found no infirmity in the Commissioner(Appeals)'s decision and dismissed the appeal of the Revenue. The Tribunal's decision was based on the precedent set by previous Tribunal rulings and the Supreme Court's affirmation of a similar case. The Tribunal's decision was in line with the interpretation that the value of scrap need not be included in the assessable value, as established by legal precedents.

In conclusion, the Tribunal's judgment upheld the impugned order passed by the Commissioner(Appeals), dismissing the Revenue's appeal and affirming that the value of scrap generated during job work need not be included in the assessable value of the finished goods, based on established legal principles and precedents.

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