Whether manufacturer liable to pay duty on waste and scrap generated at job-worker’s premises?

PJ/CASE LAW/2015-16/2657

Case:- V.E. COMMERCIAL VEHICLE LTD. VERSUS COMMISSIONER OF C. EX., THANE-I

Citation:-2015 (316) E.L.T. 251 (TRI. - MUMBAI)

Brief Facts:- The appellant, M/s. VE Commercial Vehicle Ltd. are manufacturers of motor vehicle parts. They sent the raw materials such as iron and steel products and processed goods to the job workers for manufacture/further processing under Rule 4(5) (a) of the CENVAT Credit Rules, 2004 and the goods so brought back were further used in the manufacture of automobile parts on which excise duty liability was discharged. In the processing of goods at job-worker’s end, waste and scrap arose which were classifiable under Chapter 72 of the Central Excise Tariff. However, the job worker did not discharge duty liability thereon. Therefore, a show cause notice was issued to the appellant, the principal manufacturer, demanding duty on waste and scrap which arose at the job-workers’ premises amounting to Rs. 36,38,930/- during the period September 2010 to March 2012. The appellant contested saying that he is not the manufacturer of waste and scrap and, therefore, question of his paying any duty on the waste and scrap generated in the job-workers’ premises does not arise. This contention was negatived by the adjudicating authority and the appellate authority who confirmed the duty demand and also imposed penalties. Aggrieved of the same, the appellant is before Tribunal.

Appellant’s Contention:-The learned counsel for the appellant submits that in this case raw material/processed goods were sent to the job-workers’ premises for further manufacturing under Rule 4(5)(a) of the CENVAT Credit Rules, 2004 and the appellant also brought back the processed goods and utilised the same in the further manufacture of automobile parts. On the waste and scrap generated at the job-workers end, it is for the job-worker to discharge excise duty liability thereon and the appellant cannot be asked to discharge excise duty liability on such waste and scrap generated at job-workers’ end. The issue is also settled in favour of the appellant by the orders of this Tribunal in the case of FAG Engineering (I) Ltd. v. Commissioner of Central Excise, Vadodara - 2011 (266)E.L.T.193; EMCO Ltd. v. Commissioner of Central Excise - 2008 (223)E.L.T.613; Commissioner of Central Excise v. Rocket Engineering Corporation Ltd. - 2008 (223)E.L.T.347 and Mahindra Hinoday Industries Ltd. v. Commissioner of Central Excise - 2013 (292)E.L.T.456wherein it has been held that supplier of inputs is not responsible for payment of duty on waste and scrap generated at job-workers’ premises and the liability to discharge duty remains that of the job-worker and not of the supplier of raw material. Accordingly, he pleads for grant of stay.

Reasoning of Judgement:- The rival submissions of both were considered. Rule 4(5)(a) of the Cenvat Credit Rules, 2004 nowhere envisages that the waste and scrap generated at the job-worker’s premises should be brought back by the supplier and if they are not brought back, the supplier of raw material is liable to discharge excise duty liability. What is envisaged is that the raw material sent for processing at the job-worker’s end, the processed goods should be brought back and if they are not so brought back, the appellant has to reverse the credit taken on the raw materials supplied. The liability to pay excise duty arises not under the provisions of Rule 4(5)(a) of the CENVAT Credit Rules, 2004 but under Section 3 of the Central Excise Act, 1944 on the manufacture of a marketable commodity as specified in the Central Excise Tariff Act. In the instant case, when the waste and scrap has arisen in the job-worker’s premises, the job-worker is the manufacturer of waste and scrap so generated and not the appellant, who is the supplier of the raw material. Accordingly, grant of unconditional waiver from pre-deposit of the dues adjudged against the appellant and stay recovery thereof during the pendency of the appeal.

Decision:- The appeal is allowed.

Comment:- The crux of this case is that if waste and scrap generates out of the manufacturing done at the job worker’s premises, then it is the job-worker who is liable to pay the excise duty, if any on the clearance of such waste and scrap. The excise duty liability is on the manufacture of excisable goods and when the manufacturing has been done by the job worker, then the excise duty liability, if any on the waste and scrap generated during the course of manufacturing will also be paid by the job worker and principal manufacturer is not liable for that.

Submitted By:- Somya Jain

Comments

PJ/CASE LAW/2015-16/2657

Post a Comment

Query