2023 (5) TMI 598 - AT - Central Excise

Levy of Excise duty on process loss - loss arising out of job-work - job worker has returned the equal quantity of the goods for the reason that there is an addition of paper which was used for insulation purpose - HELD THAT - Even though the job worker has returned the equal quantity of the goods for the reason that there is an addition of paper which was used for insulation purpose. As regard the process loss it is an invisible loss which arises during the course of job work, hence, the same cannot be charged to the duty. The issue is no longer res integra as per the decision of this Tribunal in the appellants own case VOLTAMP TRANSFORMERS LTD VERSUS C.C.E. S.T. -VADODARA-II 2021 (11) TMI 597 - CESTAT AHMEDABAD where it was held that issue decided in the case of M/S VOLTAMP TRANSFORMER LTD. VERSUS CCE VADODARA 2013 (11) TMI 1215 - CESTAT AHMEDABAD where it was held that There is also no binding clause in Rule 4(5)(a) of CENVAT Credit Rules, 2004 that any loss of inputs by generation of waste and scrap has to be compensated by reversing equivalent credit taken on the virgin metal, demand if any on waste and scrap has to be raised against the manufacturer job worker and not upon the raw material supplier. The impugned order is not sustainable - Appeal allowed.

Summary

Issues involved:
Whether duty is required to be paid on process loss during job work where job worker returns equivalent quantity of goods supplied by the appellant.

Summary of Judgment:

Issue 1: Duty on process loss during job work

The appellant sent copper strips, rods, etc., to job workers for paper insulation process, availing cenvat credit. The job worker returned the total weight equivalent to the input supplied. The department claimed duty on the process loss. The appellant argued that a previous order in their favor supports their case. The Tribunal examined the issue and referred to previous decisions. It was held that process loss, being an invisible loss during job work, cannot be charged duty. The Tribunal cited precedents emphasizing that duty liability for waste and scrap generated during job work falls on the job worker, not the principal manufacturer. The Tribunal also highlighted that there was no unreasonable loss claimed by the Revenue, no clandestine removal of goods, and no requirement in the rules to compensate for waste and scrap by reversing credit. Relying on previous decisions and the appellant's case, the impugned order was set aside, and the appeal was allowed.

Conclusion:
The appeal was allowed, and the impugned order was set aside based on the legal principles established in previous decisions and the specific facts of the present case.