2010 (2) TMI 1263 - AT - Central Excise

Job worker not liable for duty on retained scrap, court rules

The duty liability on scrap generated in a job worker's premises and retained by the job worker was the central issue in this case. The Adjudicating ... Duty liability on scrap generated at job worker's premises - Job worker liability for duty on scrap - Supplier not liable where scrap not returned by job worker - Cenvat Credit Rules, 2004 - liability under Rule 5(a) read with Rule 4Duty liability on scrap generated at job worker's premises - Job worker liability for duty on scrap - Supplier not liable where scrap not returned by job worker - Whether duty on scrap generated during job work and retained/removed by the job worker can be fastened on the supplier (respondent) where the scrap was not returned to the supplier. - HELD THAT: - It was undisputed that scrap generated at the job worker's premises from inputs supplied by the respondent was not returned to the respondent's factory. In the absence of evidence that the job worker returned the scrap or discharged duty on its clearance, the duty liability could not be imposed on the respondent. The Tribunal applied the ratio of earlier decisions of this Bench and other Benches (as in Alucast Foundries Pvt. Ltd. and consistent authorities) that, where waste or scrap is removed from the job worker's premises, the proper person to be made liable is the job worker and not the supplier. The learned Commissioner (Appeals) correctly followed that principle and set aside the demand, interest and penalties against the respondent. The Revenue's contention that duty should be fastened on the supplier despite the scrap being removed by the job worker was rejected on these facts. [Paras 6, 7]The demand, interest and penalties against the respondent are not sustainable; the order of the Commissioner (Appeals) is affirmed and the Revenue's appeal is rejected.Final Conclusion: The Tribunal dismissed the Revenue's appeal and upheld the Commissioner (Appeals) order setting aside the demand, interest and penalty, holding that duty on scrap removed/retained by the job worker could not be fastened on the supplier in the absence of return or evidence of duty discharge by the job worker. Issues involved: Duty liability on scrap generated in job worker's premises retained by job worker.Summary:The issue in this case pertains to the duty liability on scrap generated in a job worker's premises and retained by the job worker. The Revenue contended that the respondent is liable to pay duty on such scrap under Rule 5(a) read with Rule 4 of Cenvat Credit Rules, 2004. The Adjudicating Authority confirmed the demand, penalties, and interest, which was set aside by the learned Commissioner (Appeals) in the impugned order. The Revenue appealed against this decision.The Revenue argued that the duty liability on the scrap generated at the job worker's end must be discharged, citing previous Tribunal decisions. On the other hand, the respondent maintained that the scrap generated at the job worker's end was never returned to them, and it was unclear if the job worker had discharged the duty liability on the clearance of such scrap.After considering the submissions from both sides and examining the records, it was found that the scrap generated at the job worker's premises, on materials sent by the respondent, was not returned to the respondent's factory. Therefore, the duty liability on such scrap could not be imposed on the respondent. The decision in the case of Alucast Foundries Pvt. Ltd. was cited to support this conclusion.The judgment highlighted that when waste and scrap are generated at job workers' premises through job workers on inputs supplied by the appellants, the duty liability is to be fastened on the job workers, not on the suppliers of the raw material. The decision in the case of M/s. Emco Ltd. was also referenced to support this view. Consequently, the order of the learned Commissioner (Appeals) was deemed correct and legal, and the appeal filed by the Revenue was rejected.