Job worker scrap duty follows the job worker's rate, while SSI clearances included impregnated filter paper value.

Waste or scrap generated during job work and cleared by the job worker is liable at the duty rate applicable to the job worker who effects the clearance, not at the rate applicable to the principal manufacturer; the differential demand on that count was set aside. The value of impregnated filter paper arising from job work was held includible in the aggregate clearances for SSI exemption, and that view was upheld. However, because the earlier computation had not examined the invoices and the extent of concessional duty already paid, the duty liability on that issue was remanded for fresh recomputation.

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Issues: (i) Whether waste or scrap generated by a job worker clearing goods on payment of duty is chargeable at the rate applicable to the principal manufacturer or at the rate applicable to the job worker; (ii) whether the value of impregnated filter paper received from the job worker was includible in the aggregate value of clearances for SSI exemption, and whether the duty demand required recomputation.

Issue (i): Whether waste or scrap generated by a job worker clearing goods on payment of duty is chargeable at the rate applicable to the principal manufacturer or at the rate applicable to the job worker.

Analysis: The waste arose in the course of processing carried out by the job worker. The relevant rule required return of waste only where duty on such waste was paid, and there was no legal basis to apply the principal manufacturer's duty rate to a clearance made by the job worker. The duty payable on the waste was the duty applicable to the job worker who effected the clearance.

Conclusion: The issue was decided in favour of the assessee and the differential duty demand on this count was set aside.

Issue (ii): Whether the value of impregnated filter paper received from the job worker was includible in the aggregate value of clearances for SSI exemption, and whether the duty demand required recomputation.

Analysis: The impregnated filter paper was treated as an intermediate product arising out of job work and not as inputs removed as such for the purpose of excluding its value from SSI clearances. The Commissioner (Appeals)' view on includibility was upheld. However, the computation of differential duty required examination of the invoices and the extent to which concessional duty had been paid, which had not been undertaken earlier, making recomputation necessary.

Conclusion: The inclusion of the value was upheld, but the matter was remanded for recomputation of duty liability.

Final Conclusion: The appeal succeeded on the first issue and failed on the substantive inclusion question in the second issue, with the duty computation on that issue sent back for fresh calculation.

Ratio Decidendi: Where scrap is cleared by a job worker after processing, the duty rate applicable is the rate chargeable to the job worker who clears the waste, not the rate applicable to the principal manufacturer.

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