2011 (3) TMI 1091 - AT - Central Excise

Manufacturing company wins appeal on duty demand for copper scrap processing

The appellant, engaged in manufacturing electrical transformers, cleared copper scrap without paying duty to their job worker for further processing, ... Penalty under Section 11AC - Manufacture of electrical transformers - The scrutiny of the job work challans issued by the appellant revealed that the appellant cleared copper scrap, generated during the course of manufacture in their factory, without payment of duty to their job worker for further processing - Held that:- The issue is squarely covered by the precedent decisions of the Tribunal in the case of Shakti Wire Products Vs. CCE Mumbai [2009 (3) TMI 181 - CESTAT, MUMBAI] and Jain Metal Components Pvt. Ltd. Vs. CCE Jaipur [2005 (2) TMI 426 - CESTAT, NEW DELHI ] wherein appellant was engaged in the manufacture of excisable goods such as copper flats, rods, wires and strips. In the process of manufacture remnants of copper generated were sent by them to their job workers for conversion into copper bar. In that case also Revenue entertained a view that scrap is finished goods and hence it could not be sent to a job worker & Tribunal took the view that remnants emerging is a necessary consequence of manufacturing activity and waste and scrap generated during the process of manufacture was being recycled and reconverted. Merely because the waste and scrap has been made dutiable, it cannot be said that such a scrap cannot be sent to the job worker. The Tribunal relied upon the decision of the Five Member Bench of the Tribunal in the case of Wyeth Laboratories Ltd. Vs. CCE Bombay [2000 (7) TMI 109 - CEGAT, NEW DELHI]. Issues:- Whether the appellant's action of clearing copper scrap without payment of duty to their job worker contravened statutory provisions.- Whether the demand of Central Excise duty, interest, and penalty imposed on the appellant is justified.- Whether the copper scrap generated during manufacturing can be considered as finished goods and sent for job work without payment of duty.Analysis:Issue 1:The appellant, engaged in manufacturing electrical transformers, cleared copper scrap without paying duty to their job worker for further processing. The Revenue contended that this contravened statutory provisions, resulting in evasion of cenvat duty. The appellant's officer admitted to not disclosing data related to the copper scrap clearance. A show cause notice was issued demanding Central Excise duty, Education Cess, interest, and penalty.Issue 2:The Additional Commissioner confirmed the demand of Central Excise duty, interest, and penalty. The appeal filed by the appellant was rejected. However, during the hearing, it was argued that the precedent decisions of the Tribunal supported the appellant's case, citing instances where waste and scrap generated during manufacturing were sent for further processing without duty payment. Relying on these precedents, the impugned order was deemed unsustainable, and the appeal was allowed.Issue 3:The key contention was whether the copper scrap, considered as finished goods by the Revenue, could be sent for job work without duty payment. The appellant argued that the scrap was a byproduct of the manufacturing process and should be allowed for further processing without duty payment. Precedent cases were cited where similar situations were upheld by the Tribunal, emphasizing that waste and scrap generated during manufacturing can be recycled and reconverted without duty implications. The Tribunal's decision in this case aligned with the principles established in earlier judgments, leading to the allowance of the appeal.This detailed analysis of the judgment highlights the issues involved, the arguments presented, and the legal reasoning leading to the decision in favor of the appellant.