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TMI Blog2019 (1) TMI 1513X X X X Extracts X X X X X X X X Extracts X X X X ..... terial cannot be treated as input as such for the purpose of levy of customs duty. The Tribunal, therefore, did not commit any error in placing reliance upon Circular No.1029/2016-/CX dated 10th May, 2016. Whether clearance of such scrap upon payment of excise duty would fall within the ambit of paragraph 3 of Notification No.52/2003-Cus dated 31.03.2003? - Held that:- Waste and scrap arising in the course of production or manufacture of finished goods are also exempt from the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act - Reverting to the facts of the present case, the segregated waste has arisen in the course of production/manufacture of the finished goods viz. brass articles; the Commissioner of Customs has recorded that the segregated waste had in fact been cleared on payment of duty after being duly permitted by the Development Commissioner in accordance with the provisions of the EXIM Policy. The requirements of clause (3) of Notification: 52/2003-Cus dated 31st March, 2003 are therefore, wholly satisfied. Under the circumstances, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The respondents-assessees are 100% Export Oriented Units engaged in the manufacture of brass articles. During the relevant period, the assessees had imported brass metal scrap containing other impurities without payment of duty as per Notification No.52/2003-Cus dated 31.03.2003, as amended. Such scrap was later segregated into foundry and non-foundry scrap: foundry scrap was used in the manufacture of brass products, whereas the non-foundry scrap containing other impurities like rubber, plastic, etc. was sold in the DTA on discharge of appropriate excise duty. Demand notices came to be issued to the assessees mainly on two grounds alleging that: (i) since segregation of imported brass scrap into foundry and non-foundry did not result into manufacture, as per CBEC Circular No.62 of 2001 dated 12.11.2001, the clearance of non-foundry scrap in DTA on payment of applicable excise duty is in contravention of Notification No.53/2003-Cus dated 31.03.2003 and, therefore, applicable import duty would be recoverable from the assessees; and/or (ii) the assessees had exceeded the use of laid down ratio/norms of scrap in the segregation activity and/or in the manufacture of brass articl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, held that the non-foundry scrap cleared in DTA on payment of excise duty, cannot be construed as clearance of imported scrap as such . 2.5 On the issue of payment of duty on the excess use/consumption of scrap material in the activity of segregation/manufacture of finished goods, the Tribunal was of the view that the Commissioner (Appeals) had rightly relied upon clause (3) of Notification No.52/2003-Cus dated 31.03.2003 and hence, the demand of customs duty foregone on the excess quantity of imported scrap worked out on the basis of the norms fixed by the Committee, is not sustainable in law. 3. Mr. Nirzar Desai, learned Senior Standing Counsel for the appellant in each of the appeals, submitted that the Tribunal was not justified in holding that the segregation activity is a part of manufacturing of brass articles from imported mixed brass scrap. It was submitted that the respondents are liable to pay customs duty on the imported scrap cleared as such on the clearance of segregated non-foundry scrap in DTA. Reference was made to the Circular No.62/2001-Cus dated 12.11.2001, which has been issued regarding valuation of certain variety of plastic waste and scrap which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articles. The non foundry waste derived as a result of segregation cannot be used for the purpose of manufacture of brass articles and hence, cannot be said to be articles imported as such , since the essential character of the scrap, viz. brass is absent. The Tribunal was therefore, wholly justified in holding that the segregated scrap, if cleared, cannot be considered to be clearance of inputs as such . 6. The Tribunal has further held that the segregation of the mixed imported scrap is a part of the manufacturing of brass articles from the imported mixed brass scrap and therefore, the demand of customs duty on the clearance of segregated non-foundry scrap in DTA considering the same as imported scrap and clearance as such is unsustainable in law. 7. In this regard, as noted hereinabove, what the respondent has imported is brass scrap for the purpose of manufacturing brass articles. For this purpose, the scrap has to be segregated to first remove the brass and foundry items which are then used for manufacturing purpose. Unless the plastic and other waste is removed, it would not be possible to use the brass for manufacture. Therefore, the segregation of the brass and f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required to pay an amount equal to the credit availed in respect of such inputs in terms of rule 3(5) of the CENVAT Credit Rules, 2004. The Central Board of Excise and Customs has clarified thus: 3. The issue has been examined. Segregation from honey grade brass scrap in order to weed out other foreign materials before the process of melting in the furnace is an essential process relating to manufacture of brass articles. The foreign materials, emerging during the process of segregation have to be treated as process waste and cannot be treated like removal of inputs as such. The segregated foreign material has an altogether different character and use vis- -vis brass scrap. Value per unit and classification of the segregated foreign materials is also different from that of imported brass scrap. Accordingly, clearance of foreign material such as iron, steel, rubber, plastic, dust etc., cannot be treated as clearance of inputs as such. It may be noted that Circular No.62/2001 does not apply to the issue at hand as the facts at hand are different. 4. In view of above, it is clarified that the clearance of segregated foreign materials, namely, iron, steel, rubber, pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be specified in this behalf by Development Commissioner, or Board of Approval or the Inter Ministerial Standing Committee, as the case may be, on payment of appropriate duty of excise leviable thereon under section 3 of the Central Excise Act, 1944. Thus, waste and scrap arising in the course of production or manufacture of finished goods are also exempt from the duty of customs leviable thereon under the First Schedule to the Customs Tariff Act, 1975 and the additional duty, if any, leviable thereon under section 3 of the said Customs Tariff Act. Reverting to the facts of the present case, as noticed hereinabove, the segregated waste has arisen in the course of production/manufacture of the finished goods viz. brass articles; the Commissioner of Customs has recorded that the segregated waste had in fact been cleared on payment of duty after being duly permitted by the Development Commissioner in accordance with the provisions of the EXIM Policy. The requirements of clause (3) of Notification: 52/2003-Cus dated 31st March, 2003 are therefore, wholly satisfied. Under the circumstances, there does not appear to be any legal infirmity in the view adopted by the Tribunal. 12. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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