2022 (6) TMI 537 - AT - Central Excise

Valuation of Excisable Goods - scrap generated during the course of manufacture of tractor parts on job work basis - whether the value of scrap arising during the process of manufacture and retained by the job worker is includible in the value of the goods cleared by the job worker to the principal manufacturer? - HELD THAT - The said issue was considered in detail in the case of PR. ROLLING MILLS PVT. LTD. VERSUS COMMISSIONER OF C. EX., TIRUPATHI 2009 (3) TMI 444 - CESTAT, BANGALORE . The issue was held in favour of the assessee therein. In the present case, it has to be noted that while estimating the value of the goods cleared to the principal manufacturer, the appellant has taken the value of the entire raw materials received by them. The scrap generated during the process of manufacture has been cleared by them on payment of appropriate duty. The scrap is generated after the process of manufacture and the same is not includible in the assessable value of the goods cleared by the job worker to the principal manufacturer. The demand cannot sustain - Appeal allowed.

Summary

Issues:
Whether the value of scrap generated during manufacturing by a job worker is includible in the value of goods cleared to the principal manufacturer.

Analysis:
The case involved the appellants, engaged in manufacturing tractor parts on a job work basis for M/s. TAFE Ltd., facing allegations from the Department for not including the value of scrap in their Excise Duty calculations. The Original Authority confirmed the duty, interest, and penalty, which was upheld by the Commissioner (Appeals), leading to the appeals before the Tribunal.

The appellant's counsel argued that they had paid Excise Duty based on the cost construction basis under CAS-4, including the landed cost of cast articles. They contended that the scrap generated during manufacturing was cleared with appropriate duty payment and objected to the Department's demand to include the scrap value in the goods cleared to the principal manufacturer.

The counsel highlighted previous Tribunal orders in the appellant's favor for similar issues, citing instances where demands were set aside based on established legal precedents. The Department's Authorized Representative supported the impugned orders, leading to a detailed analysis by the Tribunal.

The Tribunal considered the key issue of whether the scrap value should be included in the assessable value of goods cleared by the job worker, referencing the decision in the case of M/s. P.R. Rolling Mills Pvt. Ltd. where the issue was decided in favor of the assessee. The Tribunal noted that the appellant had already paid duty on the scrap generated during manufacturing and concluded that the scrap value should not be included in the assessable value of goods cleared.

Relying on the precedent set in the appellant's previous cases and the decision in M/s. P.R. Rolling Mills Pvt. Ltd., the Tribunal set aside the demand, stating that the impugned orders were overturned. The appeals were allowed with consequential reliefs as per the law, emphasizing that the demand could not be sustained based on established legal principles.

In conclusion, the Tribunal's detailed analysis focused on the inclusion of scrap value in the assessable value of goods cleared by a job worker, ultimately ruling in favor of the appellant based on legal precedents and established principles in similar cases.