2017 (3) TMI 853 - AT - Central Excise

CENVAT credit - job work - waste and scrap generated in job-work - denial on the ground that job workers are availing SSI Exemption and not clearing the scrap on payment of duty - Held that - similar issue came up before this Tribunal in the case of Mahindra Hinoday Industries ltd. 2015 (1) TMI 26 - CESTAT MUMBAI wherein it was held that it is immaterial if the scrap has been generated at the end of job worker who is availing SSI exemption on the scrap - the appellant is entitled for cenvat credit on inputs which contained in waste and scrap generated at the end of job worker who is availing the benefit of SSI Exemption - credit allowed - appeal allowed - decided in favor of appellant.

Summary

Issues: Denial of cenvat credit on waste and scrap generated at the end of the job worker; Applicability of SSI exemption on scrap; Entitlement of cenvat credit on inputs contained in waste and scrap.

Analysis:

1. The appellant appealed against the denial of cenvat credit on waste and scrap generated by the job worker. The appellant, engaged in IC engine manufacturing, sent goods for processing to job workers who did not clear the scrap by paying duty due to SSI exemption. The dispute arose when the Revenue appealed against the dropping of demand by the adjudicating authority. The Commissioner upheld the demand and imposed a penalty, leading to the appellant's appeal.

2. The appellant argued that the waste and scrap generated by the job worker were not dutiable as no manufacturing process occurred with them. Citing various precedents like CCE v. Rocket Engineers Corporation Ltd. and Emco Ltd. v. Commissioner, the appellant contended that cenvat credit should not be denied on such waste and scrap.

3. The Tribunal considered the arguments and found that the appellant was entitled to cenvat credit on inputs within waste and scrap generated by the job worker, even if the job worker enjoyed SSI exemption. Referring to a CBEC Circular, the Tribunal held that inputs within waste and scrap from the manufacturing process of final products are admissible for cenvat credit. The Tribunal set aside the impugned order, allowing the appeal and granting consequential relief.

4. By relying on the precedent set in Mahindra Hinoday Industries Ltd., the Tribunal concluded that the appellant cannot be denied cenvat credit on inputs within waste and scrap generated by a job worker enjoying SSI exemption. Consequently, the impugned order was set aside, and the appeal was allowed with any necessary consequential relief.

In conclusion, the Tribunal ruled in favor of the appellant, establishing the right to claim cenvat credit on inputs contained within waste and scrap generated by a job worker, even if the job worker benefits from SSI exemption.