2005 (6) TMI 184 - AT - Central Excise

Waste and scrap - Dutiability - Whether as per the provisions of Rule 57AC(5)(a), the appellants are liable to pay the Central Excise duty on the scrap generated at their job worker's end (while processing inputs sent by the appellants) if the said scrap is not returned by the job worker to them? - HELD THAT - The Central Excise duty cannot be demanded from the appellants since the job worker is the manufacturer of the said scrap, which is retained by him and sold in the market. The similar issue is answered in the case of M/s. International Tobacco Co. Ltd. v. CCE, 2003 (10) TMI 171 - CESTAT, NEW DELHI . It is observed that no process of manufacturing taking place in respect of waste and scrap generated during the course of manufacture of cigarettes. Moreover, provision for dutiability of waste and scrap existed only in the erstwhile Central Excise Rules, 1944 (Rule 57F) and no such provision is there in the Cenvat Credit Rules, 2001. Duty is not leviable u/s 3 of the Central Excise Act, 1944. As the issue involved in this case is well-settled in the aforesaid case, these appeals are also disposed off on similar terms.

Summary

Issues:
1. Interpretation of Rule 57AC(5)(a) regarding liability to pay Central Excise duty on scrap generated at job worker's end.

Analysis:
The case involved a dispute regarding the liability of the appellants to pay Central Excise duty on scrap generated at their job worker's end, specifically focusing on recoverable and non-recoverable scrap. The appellants, engaged in manufacturing excisable goods, were processing inputs through job workers, leading to the generation of scrap. The recoverable scrap was being cleared by the appellants after paying appropriate Central Excise duty, while the recoverable scrap generated at the job workers' premises was retained and sold by them. The dispute arose when a Show Cause-cum-Demand Notice was issued to the appellants, demanding Central Excise duty, interest, and penalty for the period in question.

The Joint Commissioner, in the adjudication, confirmed the demand for Central Excise duty on recoverable scrap not returned by the job workers, along with imposing a penalty and interest. The appellants contended that Rule 57AC(5)(a) did not mandate the principal manufacturer to bring back the scrap from job workers or pay Central Excise duty on it. They argued that since the job worker was the manufacturer of the scrap and sold it in the market, the duty should not be demanded from them.

In support of their contention, the appellants cited a previous case where it was established that waste and scrap generated during manufacturing did not attract duty under the Cenvat Credit Rules, 2001, as no provision for dutiability of waste and scrap existed. It was also noted that duty was not leviable under Section 3 of the Central Excise Act, 1944, in such cases. The appellants sought a similar outcome based on the precedent set by the mentioned case.

Ultimately, the Tribunal disposed of the appeals in favor of the appellants, aligning with the precedent case's interpretation and ruling. The judgment emphasized the absence of a specific provision compelling the principal manufacturer to bear the duty on scrap generated at the job worker's end, leading to the decision in favor of the appellants based on established legal principles.

Conclusion:
The judgment clarified the interpretation of Rule 57AC(5)(a) concerning the liability of the principal manufacturer to pay Central Excise duty on scrap generated at the job worker's end. By referencing a relevant precedent and highlighting the absence of a specific provision in the rules, the Tribunal ruled in favor of the appellants, emphasizing that duty on such scrap was not applicable as per the legal framework.