Ordnance factory scrap exemption applies when waste is processed by job workers and returned for internal manufacture.

Waste and scrap generated in an Ordnance Factory remained within the scope of Notification No. 62/95-C.E. where the material was meant for use by the factory itself in further manufacture of ammunition components. The scrap was sent to job workers only for conversion into strips and was then returned for continued factory use, so the intermediary processing did not defeat the exemption. On these facts, the notification applied to the scrap cleared from the factory, and the exemption issue was resolved in favour of the assessee.

---

---

Issues: Whether waste and scrap cleared from an Ordnance Factory to job workers for conversion into strips, and ultimately used in manufacture of ammunition components, was entitled to exemption under Notification No. 62/95-C.E. dated 16-3-95.

Analysis: The exemption covered all goods produced in Ordnance Factories belonging to the Central Government and intended for consumption by the members of the Armed Forces of the Union or by such Ordnance Factories. The scrap arose in the course of manufacture, was sent to job workers only for conversion into strips, and was received back for use in the factory's further manufacture of cups for ammunition. On these facts, the scrap was treated as intended for consumption by the Ordnance Factory itself. The fact that the scrap passed through job workers did not take it outside the scope of the notification.

Conclusion: The scrap was eligible for exemption under Notification No. 62/95-C.E. dated 16-3-95, and the appeal succeeded.

Final Conclusion: The demand was set aside and the assessee obtained relief on the exemption issue, without adjudication on limitation.

Ratio Decidendi: Goods generated in an Ordnance Factory remain exempt under the relevant notification when they are meant for use by the factory itself in its manufacture, even if they are temporarily sent to job workers for processing.

---