The Ahmedabad bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has held that clearance of ferrous (iron &steel) scrap from imported brass after soring and melting process cannot be treated as removal of inputs under Rule 3(5) of the Cenvat Credit Rules, 2004.
Shri, Anand Nainawati, Counsel appeared on behalf of the appellant, Senor Metals Pvt Ltd at the outset submitted that the dispute involved has been resolved by issuing board circular No. 1029-17-2016/CX dated 1005-2016 and the subsequent judgment of the High Court of Gujarat in the case of Commissioner of Customs Vs. Monarch Overseas – 2019.
Shri, P. Ganesan, Superintendent (AR) appeared on behalf of the revenue and reiterated the finding of the impugned order.
The only issue involved in the present case is that out of imported brass scrap while used in the manufacture the sorting of the brass scrap and removal of impurities including various materials such as scrap of other metal and sale of the same will attract payment under Rule 3(5) of Cenvat Credit Rules, 2004.
The central board of Excise and Customs wherein the board vide circular No 1029-17-2016/CX dated 10-05-2016 clarified the matter as under:
“Representations have been received from the members of the trade involved in the manufacture of brass products, regarding the applicability of provisions relating to clearance of segregated foreign materials as “inputs as such” from imported honey grade brass scrap. The said imported scrap mainly contains brass metal but it also contains impurities like iron, steel, rubber, plastic, dust etc. which are integrally attached to the main material/brass scrap. Before feeding the resultant brass scrap in the furnace during the manufacturing process, the said foreign materials (impurities) attached to the honey-grade brass scrap is segregated manually and then such sorted material is issued for further process like breaking, cutting etc. wherein big pieces of scrap are converted into small pieces so that the same can be fed into the furnace. Ultimately the brass scrap is fed into a furnace where brass melts but materials like steel iron etc do not as they have higher melting points. Molten brass is poured for manufacturing whereas foundry waste of iron, steel, and slag is cleared and sold separately. Such foundry waste is quite clearly processed waste. “
The two-member bench comprising Mr Ramesh Nair, Member (Judicial) and Mr C L Mahar, Member (Technical) held that the impugned order is not sustainable and set aside the same.
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