Scrap Generated During Manufacture can be Removed without Payment of Excise Duty for Job Work: CESTAT [Read Order]

The Chandigarh Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), observed that the scrap generated during manufacture can be removed without payment of excise duty for job work.

M/s YKK India Pvt. Ltd, the appellant, is engaged in the manufacture of Slide Fastereners (Metallic and Non-Metalic), chains and sliders (“Final Products”) failing under chapter heading 9607 19, 9607 11 and 9607 20 respectively of the Central Excise Tariff Act, 1985. During the relevant period, the appellant discharged duty at 10% and availed CENVAT credit on the duty paid on inputs/capital goods.

During the relevant period, the appellant sent brass cutting waste (“Brass Scrap”) generated during the manufacture of the Final Products to job worker under job work challans issued in terms of Rule 4(5)(a) of the CENVAT Credit Rules, 2004 read with Notification No. 214/86-CE dated 25.03.2086 without payment of duty for remelting and conversion into brass wires. The brass wires were then returned to the appellant’s factory for use in the manufacture of the final products.

The Counsel for the appellant submitted that the impugned order has wrongly held that the Brass Scrap generated during the manufacture of final product is itself a final product and cannot termed as an input under Rule 4(5)(a) of the Cenvat Credit Rules. The Brass Scrap in question is recyclable material which is sent to the job worker for conversion into brass wires which is used as an input for manufacture of final product by the appellant.

A Two-Member Bench comprising SS Garg, Judicial Member and P Anjani Kumar, Technical Member relied on the judgment in Wyeth Laboratories Ltd. Vs. CCE Bombay and observed that “scrap generated during manufacture can be removed without payment of duty at the option of the assessee for job work and can be used as inputs.”

“The Tribunal in the case of Comet Brass Industries while referring to the judgment of the Wyeth Laboratories Ltd has held that the entire purpose of setting down the disputed issue is defeated of majority decisions are not followed by the field formations and further the Tribunal set aside the order which was based on the minority view expressed in the Larger Bench’s decision in the case of Wyeth Laboratories Ltd” the Bench noted.

To Read the full text of the Order CLICK HERE

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