The Mumbai bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has held that the value of scrap cleared by excise duty cannot be included in the assessable value.
M/s. Shilpa Steel & Power Ltd, 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 onthe sale price adopted by SAIL and the same was claimed to be by 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, the demand with consequential penalty and interest was confirmed in the adjudication order and the Appellant’s unsuccessful attempt before the Commissioner (Appeals) brought the dispute to the present forum.
During the hearing of the appeals, Counsel for the Appellant Mr. Saurabh Bhise submitted that issue has been settled at rest by this Tribunal in the Appellant’s case for the prior period from April 2007 to December 2010 which was reported in 2014 (307).
Supreme Court passed in the case of R.R. Rolling Mills Ltd. Vs. CCE as reported in 2010 (260)demand has been set aside and in the other appeal, the period of dispute relates to January 2011 to October 2012, during which period, Rule 10A of the Central Excise Valuation Rules, 2000 has already been brought into the statute book.
He 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 because 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 and, therefore, the order passed by the Commissioner (Appeals) is unsustainable both in law and facts.
The judgment of R.R. Rolling Mills Ltd. in which consistent findings was that the value of scrap need not be included in the assessable value and Appellant had rightly placed the following judgments namely SRF Limited Vs. CCE was reported in 2007 (220).
A division bench of Dr Suvendu Kumar Pati, Member (Judicial) and Mr Anil G Shakkarwar, Member (Technical) in the Appellant’s case, for two other periods pre and post-2007, demand against the Appellant has been set aside for the reason that value of scrap need not be included in the assessable value.
The appeals are allowed and the order passed by the Commissioner of Customs, Excise & Service Tax is set aside with consequential relief.
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