2016 (9) TMI 630 - AT - Central Excise

Job-work - Valuation - includability - value of scrap retained by the appellant, who is a job worker - appellant clears the scrap so retained by them and discharges the duty liability on it - Held that - the appellant has discharged the duty liability on the scrap and again, demanded duty by including the value in job work charges, which will amount to double taxation. Also an identical issue came up before the Bench of the Tribunal in the case of P.R. Rolling Mills Pvt. Ltd. 2009 (3) TMI 444 - CESTAT, BANGALORE wherein it was held that adding the value of scrap in the assessable value after payment of duty on the same would amount to addition of the value of the scrap twice. Therefore, the impugned order is unsustainable. - Decided in favour of appellant

Summary

Issues Involved:
Demand of central excise duty on the value of scrap retained by the appellant, who is a job worker.

Analysis:
The appeal was filed against the order-in-appeal dated 27.08.2008 concerning the demand of central excise duty on the value of scrap retained by the appellant, a job worker manufacturing HDPE bags for a customer. The appellant discharged duty liability based on raw material cost, job work charges, and profit margin, retaining scrap generated during manufacturing. The appellant cleared and discharged duty on the retained scrap. Revenue sought to include scrap value for duty on job worked goods. The Tribunal noted that including scrap value in job worked goods would lead to double taxation as the duty on scrap was already paid. Referring to a previous case, the Tribunal highlighted that the value of scrap should not be included twice, as it was separately cleared and duty paid. The Tribunal cited the case of Lawkim Ltd. & Ors. and International Auto Ltd., where it was held that adding scrap value to job worked goods' value was incorrect. The Tribunal's decision was challenged in the Apex Court, which dismissed the appeal on delay and merit grounds. Consequently, the Tribunal found the lower authorities' case laws insufficient to support their argument.

In conclusion, the Tribunal held that the impugned order was unsustainable and set it aside, allowing the appeal with consequential relief. The decision was based on the principle that including scrap value in the duty calculation for job worked goods would result in double taxation. The judgment emphasized that the duty had already been discharged on the scrap separately, making it unjust to include its value again in the job worked goods. The Tribunal's ruling was in line with previous decisions and established legal principles, ensuring fair treatment and avoiding duplication of tax liabilities.