The Allahabad Bench of the Customs, Excise and Service Tax Appellate Tribunal(CESTAT) has held that the value of scrap cannot be included in the assessable value in terms of alternate procedures of Rules 4(5)(a) of Cenvat Credit Rules (CCR), 2004.
M/s. Shilpa Steel & Power Ltd, the appellant assessee challenged the order passed by the Commissioner (Appeals) which confirmed the Inclusion of the value of scrap on the job worker alongwith interest and penalty.
The Appellant is a manufacturer of rolled products of Iron & Steel and it also had undertaken job work of the same for other manufacturers/suppliers on receipt of inputs free of cost from them. The disputed period relates to the manufacture of rolled products on a work basis by the Appellant for Steel Authority of India Limited (SAIL). On receipt of raw material from SAIL, the Appellant had manufactured rolled products and cleared the same either to the depot of SAIL or to the Customer of SAIL.
The Assessable value was determined based on the sale price adopted by SAIL and the same was claimed to be as per Rule 10A of the Central Excise Valuation Rules, 2000. During the process of manufacturing, certain waste and scrap of Iron and steel were generated which were cleared as scrap on payment of applicable duty on them. The Respondent-Department claims that the Appellant had retained the scrap in respect of job work done for SAIL, for which sale proceeds of the same, being as additional consideration, should have been included in the value of rolled products.
Accordingly, the demand was raised through show-cause notice, the matter was adjudicated upon, demand with consequential penalty and interest was confirmed in the adjudication order.
The Counsel for the Appellant Mr Saurabh Bhise submitted that the issue has been settled by the Tribunal in the Appellant’s case for the prior period from April 2007 to December 2010 which has been reported in 2014 (307) ELT 915 (T). Further submitted that since the Appellant had discharged duty on the value at which the principal manufacturer SAIL had sold its product to the customers, the issue is squarely covered by the judgment of Scrutech Tubes (I) Ltd. Vs. CCE, besides the fact that demand would otherwise not be sustainable in view of Rule, 4(5)(a) of the CENVAT Credit Rules, 2004 had input supplier followed the alternate procedure of sending inputs under Rule 4(5)(a) and Appellant job worker returning the manufactured product without payment of duty.
The Authorised Representative for the Respondent-Department Mr. P.K. Acharya argued in support of the reasoning and rationality of the order passed by the Commissioner (Appeals).
A two-member bench comprising Dr Suvendu Kumar Pati, Member (Judicial) and Mr Anil G Shakkarwar, Member (Technical) set aside the demand against the Appellant for the reason that the value of scrap need not be included in the assessable value. The appeal of the assessee was allowed.
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