2018 (6) TMI 769 - AT - Central Excise

Demand of duty- Scrap - Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - Held that - There is no doubt that the removal of defective/damaged mould is nothing but a removal of input for further processing by the job worker. Therefore, the removal is correctly covered by Rule 4(5)(a) of the Cenvat Credit Rules, 2004 - appeal allowed - decided in favor of appellant.

Summary

Issues:
- Whether the demand of excise duty on damaged/defective moulds cleared for reprocessing and remaking under Rule 4(5)(a) is valid.

Analysis:
The appellant used moulds for manufacturing their final product, which, after a substantial period of use, became damaged and defective. These defective moulds were sent to a job worker for reconditioning and remaking under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The job worker then returned the remade moulds to the appellant for further use in manufacturing the final product. The department contended that the clearance of damaged moulds constituted waste and scrap arising from the final product's manufacture, requiring payment of duty instead of being covered under Rule 4(5)(a).

The appellant's counsel argued that the issue had been settled by a five-member Larger Bench of the Tribunal in the case of Wyeth Laboratories Ltd. vs. CCE, Bombay. Additionally, the counsel cited other judgments supporting the appellant's position. The Revenue representatives maintained the findings of the impugned order.

Upon careful consideration of the submissions, the Member (Judicial) found that the demand for excise duty on damaged/defective moulds cleared for reprocessing and remaking under Rule 4(5)(a) was unwarranted. The Member reasoned that since the appellant had initially availed cenvat credit for purchasing the moulds, their clearance after use, even in a damaged state, constituted the removal of inputs for further processing by the job worker. This removal was deemed to be correctly covered by Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The Member highlighted that the issue had already been settled in favor of the assessee by the Larger Bench in the case of Wyeth Laboratories Ltd.

Consequently, the impugned order demanding excise duty on the damaged/defective moulds was set aside, and the appeals were allowed.