2023 (6) TMI 1194 - AT - Central Excise

Reversal of pro-rata CENVAT Credit - short receipt of the processed inputs from the premises of the job workers - Rule 4(5)(a) of the CCR - HELD THAT - The wastage/scrap generated in the course of job work, being less than 10% for PP Granules and 5% for LLDPE Granules was within the prescribed SION norms and the existence of such wastage/scrap in the process of conversion is provided for not only in the Work Orders but also in the permission conferred by the Jurisdictional Commissioner under Rule 4(6) of the CCR. Further, the claim of the Appellant that the job worker had discharged duty on the waste/scrap at the time of his clearance is also supported by job work Challans, excise Invoice besides the Order dated 9 June 2006 passed by the Assistant Commissioner in the connected proceedings. The issue involved herein is also covered by the decision of this Tribunal in EMCO LTD. VERSUS COMMISSIONER OF CENTRAL EXCISE, MUMBAI-III 2007 (11) TMI 108 - CESTAT, MUMBAI where it was held that supplier can not be held liable on the ground that the worker had not discharged duty liability on impugned waste and scrap. Irrespective of whether the job worker had discharged the duty liability on the scrap generated at hisend, the duty liability cannot be fastened on the principal manufacturer/supplier of inputs. Appeal allowed.

Summary

Issues involved:
The issues involved in the judgment are whether pro-rata Cenvat credit is required to be reversed under Rule 4(5)(a) of the Cenvat Credit Rules for short receipt of processed inputs from job workers' premises and the applicability of wastage/scrap generated during job work on reversal of credit.

Summary of Judgment:

Issue 1: Short receipt of processed inputs from job workers' premises

The appellant, a manufacturer operating under the Centvat Credit Scheme, faced proceedings due to alleged short receipt of inputs sent to job workers. The demand was contested by the appellant, citing wastage/scrap during processing as the reason for short receipt. The Tribunal found that the wastage/scrap generated was within prescribed norms and supported by work orders and permissions. Referring to relevant case laws, the Tribunal held that duty liability cannot be imposed on the principal manufacturer/supplier for scrap generated at job workers' end. The duty demand was set aside based on these findings.

Issue 2: Applicability of wastage/scrap on reversal of credit

The appellant argued that the wastage/scrap generated during job work did not require reversal of credit, as the job workers had discharged excise duty on the waste/scrap cleared from their premises. The Tribunal noted that the wastage/scrap levels were within norms and supported by work orders and permissions. Citing relevant precedents and a circular by the Board, the Tribunal concluded that Cenvat credit shall be admissible in respect of waste, refuse, or by-products. Consequently, the duty demand confirmed in the original order was held to be unsustainable on merits.

In conclusion, the appeal was allowed, the original order was set aside, and consequential relief, if any, was granted to the appellant.