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2018 (7) TMI 865 - AT - Customs100% EOU - demand of customs duty foregone on the excess quantity of imported scrap - Manufacture - Whether the activity of segregation of imported mixed brass scrap into foundry and non-foundry grade, amounts to manufacture or otherwise? - Held that - Circular of Board dated 10/05/2016 is a clarification on the issue of segregation of impurity, namely ,iron, steel, rubber, plastic, dust etc. from honey grade brass scrap imported, albeit in the context of Rule 3(5) of CENVAT credit rule 2004, but definitely applicable to the present case - From the above clarification, it is clear that after segregation of the mixed imported scrap, the segregated scrap, if cleared, cannot be considered as clearance of inputs as such . The process of segregation of imported mixed brass scrap, into foundry and non foundry grade by weeding out the impurities so as to prepare it or make it suitable to feed into the furnace for manufacture brass ingots, and then finished goods, is a process integrally connected to the manufacture of brass articles - Tribunal in the case of Singh scrap Processor Ltd. Vs, Commissioner of C.Ex. 2002 (4) TMI 114 - CEGAT, MUMBAI held the process of removal of impurity results into manufacture. Accordingly, the non-foundry scrap cleared in DTA on payment of excise duty, cannot be construed clearance of imported scrap as such . Payment of duty on the excess use/consumption scrap material, in the activity of segregation/manufacture of finished goods - Held that - In the present case, the scrap generated during the course of segregation/manufacture of brass articles had been permitted to be cleared in the DTA by the Development Commissioner and the Appellant-assessee had cleared the scrap pursuant to the said permission and discharged appropriate excise duty on its sale. Hence, demanding customs duty foregone on the excess quantity of imported scrap worked out on the basis of the Norms fixed by the Committee is not sustainable in law. Appeal disposed off.
Issues Involved:
1. Whether the segregation of imported mixed brass scrap into foundry and non-foundry grades amounts to manufacture. 2. Whether customs duty is recoverable on non-foundry scrap cleared in the Domestic Tariff Area (DTA). 3. Whether the use/consumption of excess quantity of scrap during segregation/manufacture of brass articles violates the norms fixed by the Norms Committee or the Notification. Issue-wise Detailed Analysis: 1. Segregation as Manufacture: The primary issue was whether the segregation of imported mixed brass scrap into foundry and non-foundry grades constitutes manufacture. The Tribunal referred to a recent Circular (F.No.267/33/2014-CX.8 dated 10/05/2016) which clarified that segregation of impurities from brass scrap is an essential part of the manufacturing process. It stated, "The foreign materials, emerging during the process of segregation have to be treated as process waste and cannot be treated like removal of inputs as such." This Circular, though issued in the context of CENVAT Credit Rules, was deemed applicable. The Tribunal concluded that segregation is a part of manufacturing brass articles, thus rejecting the Revenue's contention that segregation does not amount to manufacture. 2. Customs Duty on Non-Foundry Scrap: The Tribunal examined if customs duty is recoverable on non-foundry scrap cleared in the DTA. It was clarified that the segregation activity is integral to manufacturing brass articles, and thus, the non-foundry scrap generated during this process cannot be considered as clearance of "inputs as such." The Tribunal cited the Supreme Court's decision in CCE Vs. Rajastan Chemical Works, which defined manufacturing processes as those that bring about a commercially different article. Consequently, the demand for customs duty on non-foundry scrap cleared in the DTA was deemed unsustainable. 3. Use/Consumption of Excess Scrap: The Tribunal addressed whether the consumption of excess scrap during segregation/manufacture violated the norms. The Commissioner (Appeals) had previously observed that the excess scrap cleared in the DTA on payment of appropriate excise duty, with permission from the Development Commissioner, falls within the scope of clause (3) of Notification No. 50/2003-Cus. This clause allows for the sale of by-products, rejects, waste, and scrap in the DTA on payment of excise duty. The Tribunal upheld this interpretation, stating that the exemption under Notification No. 50/2003-Cus cannot be denied if the conditions are met. Therefore, the demand for customs duty on excess scrap based on Norms Committee's limits was found to be unsustainable. Summary of Findings: (i) The segregation of imported mixed brass scrap into foundry and non-foundry grades results in manufacture. The Revenue's appeals on this count were rejected. (ii) The excess scrap generated during segregation/manufacture, cleared on payment of excise duty in the DTA with the Development Commissioner's permission, is covered by clause (3) of Notification No. 50/2003-Cus. The orders of the Commissioner (Appeals) supporting this view were upheld, and contrary orders were set aside. Appeals by the assessees were allowed. Disposition: The appeals were disposed of as per the above findings. The operative portion of the order was pronounced in open court.
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