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2025 (3) TMI 826 - AT - Central ExciseLiability of appellant as a job worker to pay excise duty - activities of converting lead scrap into lead alloy ingots - Processes undertaken by the appellant as a job worker amounts to manufacture or not - applicability of Rule 4(5)(a) of the CENVAT Credit Rules 2004 - extended period of limitation - HELD THAT - Rule 4(5) specifically states that CENVAT Credit is allowable if any input or capital goods after being partially processed are sent to a job worker for further processing testing repair re-conditioning or for the manufacture of intermediate goods necessary for manufacture of final products etc. From the chain of events it is clear that the lead scrap and other raw materials supplied by EIL are in the nature of inputs (semi-processed). The Larger Bench of the Tribunal in the case of Wyeth Laboratories Ltd. vs Collector of Central Excise Mumbai 2000 (7) TMI 109 - CEGAT NEW DELHI had held that waste scrap could be sent to a job worker for purpose of processing and manufacture of intermediate products which could be further put to use in the manufacture of final product at the end of the principal manufacturer. The said rule obligates that the goods that are sent by the principal manufacturer without payment of central excise duty are subsequently returned for further processing to the principal manufacturer for utilization in the final product (viz. lead storage battery in the present case) within the specified period. Also with respect to the Standard Input Output Norms (SION) we take note of the appellant s assertion that quality of lead scrap is an important variable and is necessary for consideration to arrive at the recovery percentage (based on thorough testing of waste and scrap) as undertaken by EIL in their R D section. The percentage of recovery would depend on the lead content in the waste and scrap and the nature of the scrap like lead scrap or dross or sludge etc. There cannot therefore be a fixed one-to-one formula. Thus as for the Department s contention on the recovery part and adoption of the SION norms to the present matter is concerned it cannot be doubted that the recovery percentage would vary from case to case more so when the scrap supplied is not the kind of standard scrap as enumerated in the norms as has also been duly tested and certified by the R D wing of EIL at the time of supply. We further note that the kind of scrap indicated in the norms is well-defined and clearly states of its constitution etc. In view of the fact that the goods were supplied in terms of job challans issued under rule 4(5)(a) ibid the purchase orders as supplied by EIL indicating recovery percentages in addition to other details we are of the view that there is no case made out for demand of duty of excise if any from the job worker. There is also no merit in the department s proposition in denying the appellant the job work status by imputing that the lead converted from lead scrap could not be cleared from their end upon payment of central excise duty as the said amounts to manufacture - the claim of the Department disentitling the waste and scrap for the benefit of Rule 4(5)(a) of the Cenvat Credit Rules 2004 does not stand to any merit - there are no justification for the demand of duty or imposition of penalty on the appellant in the matter. Conclusion - i) Job work under Rule 4(5)(a) does not require the processes to amount to manufacture under Section 2(f) of the Central Excise Act. The responsibility for duty liability lies with the principal manufacturer not the job worker. ii) There is also no merit in the department s proposition in denying the appellant the job work status by imputing that the lead converted from lead scrap could not be cleared from their end upon payment of central excise duty as the said amounts to manufacture. Appeal allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered in this judgment are:
2. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents: The case revolves around the interpretation of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, which allows a manufacturer to send inputs or capital goods to a job worker for further processing, testing, repair, re-conditioning, or for the manufacture of intermediate goods necessary for the final product. The rule mandates that the goods must be received back within 180 days. Notification No.214/86-CE provides exemptions for goods manufactured on job work basis, subject to certain conditions. The Tribunal also refers to the precedent set by the Larger Bench in Wyeth Laboratories Ltd. vs Collector of Central Excise, which clarifies the treatment of waste and scrap under the Cenvat Credit Rules. Court's Interpretation and Reasoning: The Tribunal found that the appellant's activities of converting lead scrap into lead alloy ingots fall within the scope of job work under Rule 4(5)(a). The Tribunal emphasized that the processes undertaken need not amount to manufacture under Section 2(f) of the Central Excise Act to qualify as job work. The Tribunal also noted that the principal manufacturer, not the job worker, is responsible for accounting for the materials sent for job work. Key Evidence and Findings: The Tribunal considered job challans, purchase orders, and other records indicating the supply and return of materials between the principal manufacturer and the appellant. The evidence showed compliance with the 180-day return requirement. The Tribunal found no material evidence supporting the department's claim of short supply or clandestine clearance. Application of Law to Facts: The Tribunal applied Rule 4(5)(a) to determine that the appellant, as a job worker, was not liable for excise duty on the conversion of lead scrap into lead alloy ingots. The Tribunal held that the appellant's activities were covered under the rule and that the principal manufacturer was responsible for any duty liability. Treatment of Competing Arguments: The Tribunal rejected the department's argument that the processes amounted to manufacture, thereby excluding the appellant from the benefits of Rule 4(5)(a). The Tribunal also dismissed the department's reliance on SION norms, noting that the quality and type of scrap varied and could not be uniformly applied. Conclusions: The Tribunal concluded that the appellant was entitled to the benefits of Rule 4(5)(a) and Notification No.214/86-CE. The Tribunal found the department's allegations of non-disclosure and clandestine clearance to be unsupported by evidence. 3. SIGNIFICANT HOLDINGS Core Principles Established: The Tribunal reaffirmed that job work under Rule 4(5)(a) does not require the processes to amount to manufacture under Section 2(f) of the Central Excise Act. The responsibility for duty liability lies with the principal manufacturer, not the job worker. Final Determinations on Each Issue: The Tribunal set aside the Order-in-Original, allowing the appellant's appeal with consequential relief. The Tribunal found no justification for the demand of duty or penalty on the appellant. Verbatim Quotes of Crucial Legal Reasoning: "The understanding rendered by the Ld. Commissioner does not flow from the provision of the rules and the law as settled by judicial bodies." "The word 'waste' used in rule 57F(4) has to be understood to denote a form of inputs, after partial or full reprocessing which could not in a technological/commercially feasible manner be converted to a final product or desired to be used any further." "The procedures under Rule could be 'aborted' and recourse taken to Rule 57F(4) at a stage, but only at the option of the assessee."
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