2017 (12) TMI 617 - AT - Central Excise

Waste and scrap - excisability - it appeared that appellant had removed a quantity of 22,790 MT of waste and scrap which had arisen during the course of manufacture of finished goods to one Kanishk Steel Industries without payment of excise duty - Department took the view that such waste and scrap that have arisen during the course of manufacture are excisable and dutiable - SSI Exemption - Held that - The department has only found fault with the assessee for having removed the said waste and scrap without following the procedures of Notification No.214/86-CE. Though appellants did not take permission or intimate that they are sending the goods to a job worker under N/N. 214/86-CE, it is not in dispute that waste and scrap that were sent out to Kanishk Steel Industries were done so only on delivery notes and the converted products had also been received back under invoices accounted for and utilized in further manufacture of final products. There is thus no allegation that the waste and scrap have been diverted or clandestinely sold. In any case, the broad procedural requirements of N/N. 214/86-CE, though not opted for, have been largely followed. The waste and scrap could at best be considered as captively consumed goods, the value of which is definitely not required to be excluded under the SSI exemption notification - the value of reusable scrap which is again used in the manufacture of final products will then not form part of the aggregate value of clearances for the purposes of SSI Notification. Appeal allowed - decided in favor of appellant.

Summary

Issues:
1. Whether waste and scrap arising during the course of manufacture are excisable and dutiable.
2. Whether clearances of waste and scrap to a job worker for recycling and captive consumption are liable for excise duty.
3. Whether interest and penalty can be imposed on clearances without duty liability.

Analysis:
1. The case involved the appellant, a furniture manufacturer, who had removed waste and scrap to another company without paying excise duty. The Department contended that such waste and scrap were excisable and dutiable. Three adjudication orders were issued against the appellant, demanding duty, interest, and imposing penalties. The Commissioner (Appeals) upheld these orders.

2. During the hearing, the appellant argued that the waste and scrap were cleared to a job worker for conversion and not for sale. They received back fully manufactured goods after conversion and paid excise duty on them. The appellant claimed that clearances to a job worker could be done without payment of excise duty under certain procedures. They cited relevant decisions to support their argument. On the other hand, the Department supported the impugned order.

3. The Tribunal examined the facts and found that the waste and scrap were indeed sent to the other company for conversion into finished goods, which were then received back by the appellant. The converted materials were used in further manufacturing processes. The Department's contention was that the appellant did not follow specific procedures, but it was acknowledged that the waste and scrap were not diverted or clandestinely sold. The Tribunal held that the waste and scrap could be considered captively consumed goods, and their value did not need to be excluded under the relevant exemption notification.

4. The Tribunal referred to relevant provisions and case law to support its decision. It highlighted that when goods are recycled captively or sent to a job worker for further processing, their value does not form part of the aggregate value for duty calculation purposes. The Tribunal emphasized the commercial and technological aspects of waste and scrap utilization in manufacturing processes. Ultimately, the Tribunal set aside the impugned orders, allowing the appeal filed by the appellant.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the waste and scrap sent for conversion to a job worker for further manufacturing processes did not attract excise duty. The Tribunal emphasized the importance of following relevant procedures and highlighted the distinction between waste and scrap used in manufacturing processes and those that are no longer useful.