2023 (3) TMI 434 - AT - Central Excise

SSI Exemption - job worker - removal of the scrap to the job worker was done as per Rule 4 (5) (a) of Cenvat Credit Rules, 2002 - Department was of the view that the appellant ought to have paid duty on scrap while removing them to the job worker - recovery of Central Excise duty on scrap removed to job worker for the period from September 2008 to February 2010 - whether the appellant is liable to pay duty on the scrap that has been sent to the job workers for manufacture of intermediate products such as angles and channels. HELD THAT - It is not disputed that removal of the scrap to the job worker was done as per Rule 4 (5) (a) of Cenvat Credit Rules, 2002. So also, it is not disputed that the job worker cleared intermediate goods in the nature of angles and channels to the appellant by paying duty and raising invoices. The show cause notice dated 14.06.2012 is issued invoking the extended period. It is not disputed that the appellant has accounted the removal of scrap to the job worker as well as the clearance of the intermediate goods (angles and channels) by payment of duty. The Department has vaguely alleged that the appellant has suppressed facts with intention to evade payment of duty. There is no evidence to show that the appellant has done any positive act to deliberately suppress the facts so as to evade payment of duty. The appellant therefore succeeds on the ground of limitation also. Appeal allowed.

Summary

Issues: Liability to pay duty on scrap sent to job workers for manufacturing intermediate products.

Analysis:
1. Factual Background: The appellant, a manufacturer, availed small scale exemption but crossed the limit and started clearing products on payment of duty. They sent steel scrap to job workers under Rule 4 (5) (a) of Cenvat Credit Rules, 2004, and received angles and channels in return, on which the job worker discharged duty liability.

2. Adjudication and Appeal: The adjudicating authority confirmed the duty demand, interest, and imposed a penalty. On appeal, the Commissioner (Appeals) upheld the decision, leading to the current appeal before the tribunal.

3. Appellant's Argument: The appellant's consultant argued that all scrap sent to job workers was returned as converted goods, supported by delivery challans. He contended that there was no duty liability on the scrap sent to job workers, citing relevant case laws and circulars.

4. Department's Position: The Additional Commissioner supported the findings of the lower authorities, maintaining that duty should be paid on scrap sent to job workers for manufacturing intermediate products.

5. Legal Analysis: The key issue was whether duty should be paid on scrap sent to job workers. The tribunal referred to a circular permitting the movement of scrap for conversion into intermediate goods. Citing a previous case, the tribunal held that the manufacturer has the option to send scrap under different rules, and in this case, duty payment was not required.

6. Decision: After considering the facts, legal provisions, and precedents, the tribunal found that the demand for duty could not be sustained. The show cause notice was issued invoking the extended period, but the appellant accounted for the removal of scrap and clearance of intermediate goods by paying duty. The tribunal concluded that there was no evidence of intentional suppression of facts to evade duty payment. Therefore, the appeal was allowed, and the impugned order was set aside.

7. Conclusion: The tribunal ruled in favor of the appellant, setting aside the duty demand and penalty imposed. The decision was based on the absence of evidence supporting the allegation of suppression of facts and the appellant's compliance with duty payment on the cleared intermediate goods.