EOUs/ EPZ Units - Removal of scrap for conversion into ingot cannot be done without payment of duty - Customs - 015/96

Circular No. 15/96-Cus. dated 8/3/96 F.No. 305/15/94- FTT Government of India Ministry of Finance Department of Revenue, New Delhi Subject : 100% EOU / EPZ Scheme - sub - contracting / Job - work - Removal of scrap for recycling and conversion - Reg. I am directed to invite reference to the circular letter of even No. dated 27th October, 1994 on the above mentioned subject, wherein it was clarified that scrap is a semi-finished item and the facility of sub-contracting by 100% EOU / EPZ Units for recycling of scrap into ingots outside such units in the DTA can be allowed in terms of the instructions issued vide F.No. 305/107/93-FTT dated 31.1.1994. A doubt has been raised in this regard whether scrap can be cleared from the units for job work in DTA free of duty for conversion to ingot and whether the ingot can there be taken back by EOU as raw material, free of duty and whether this process of conversion of scrap to ingot amounts to a manufacturing process 2. The matter has been re-examined by the Board and it is clarified that conversion of scrap into ingots involves a complete process of manufacture. The work of recycling can not be treated part of jobwork on the goods being produced by the EOU. This activity would also not be covered under para 2(a) of Notification No. 1/95-CE. under which goods can be taken to DTA in certain circumstances without payment of duty. The scrap, therefore, can not be taken out duty free from the EOU, as such will have to be removed on payment of appropriate excise duty in terms of Central Excise Not. No. 2/95 dated 4.1.1995. However, the ingots, after conversion, can be brought back into the EOU without payment of duty in terms of Not. 1/95-CE dated 4.1.1995 on a CT- 3 certificate for further use in the units as raw material. 3. In this regard the decision of the Supreme Court on Job work in the Prestige Engineering case 1994(73) LET 769(SC), may be referred to, According to the ratio of this decision removal of scrap to DTA for recycling, to obtain ingot can not be treated as job work, because it results into a manufacturing a totally new article. 4. On the basis of the above stated clarification, Commissioners of Customs and Central Excise are requested for re-examination of the cease where such permissions have been issued by them. If such permission have been issued, demand for payment of duty can also be issued under Section 11A (i) of Central Excise Salt Act. Sd/- (Ranjana Jha) Under Secretary to the Govt. of India