Excise treatment of machining scrap: waste cleared under small-scale exemption can be treated as duty-paid nil.

Scrap generated during machining by job workers need not be returned to the principal manufacturer where Rule 57F(5)(ii) of the Central Excise Rules, 1944 applies and the duty payable on such waste is discharged. The text explains that if the job workers clear the scrap under a small-scale exemption, no excise duty is payable on that waste, so the effective duty on the scrap is nil. On that basis, the scrap may be treated as having suffered the applicable duty of excise, and the contrary view is not sustainable.

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Issues: Whether scrap generated during machining by job workers was required to be returned to the main manufacturer or treated as having discharged excise duty where the job workers operated under small-scale exemption.

Analysis: The scrap arose in the course of machining sent to job workers and, under Rule 57F(5)(ii) of the Central Excise Rules, 1944, waste need not be returned to the main manufacturer if the duty payable on such waste is paid. Where the job workers cleared the scrap under small-scale exemption, no excise duty was payable by them, so the duty on the waste was effectively nil.

Conclusion: The scrap was rightly treated as having suffered the applicable duty of excise, namely nil, and the impugned order could not be sustained. The appeal was allowed in favour of the assessee.

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