Manufacture and limitation in reprocessed scrap: conversion of rejected films into distinct scrap sustained manufacture, while extended demand failed.
Reprocessing rejected multi-layer films into granules and waste and scrap, where the end product acquires a different name, character and use, is treated as manufacture; duty on the reprocessed scrap was therefore sufficient and no further credit reversal was warranted. The extended period of limitation could not be invoked because the record showed intimation and correspondence with the department, and there was no suppression or conscious withholding of facts. On both issues, the finding was in favour of the assessee and the demand was set aside with consequential relief.
Issues: (i) whether conversion of rejected multi-layer films into granules and waste and scrap amounted to manufacture; (ii) whether the demand was sustainable in view of limitation.
Issue (i): whether conversion of rejected multi-layer films into granules and waste and scrap amounted to manufacture.
Analysis: The rejected films were received back after supply, processed through a job worker, and emerged as granules and waste and scrap having a different name, character and use. The original authority had found that the process resulted in a new and distinct product. The reprocessed scrap was cleared on payment of duty on its transaction value. The issue was covered by earlier Tribunal decisions holding that reprocessing of rejected material, where the end product is only scrap, amounts to manufacture and duty is payable on such scrap.
Conclusion: The process amounted to manufacture and the duty paid on the reprocessed scrap was sufficient; no further reversal of credit was warranted. The finding is in favour of the assessee.
Issue (ii): whether the demand was sustainable in view of limitation.
Analysis: The record showed intimation to the department and subsequent correspondence, negativing suppression. Extended limitation requires conscious withholding of information or a positive act beyond mere inaction. On the facts, the ingredients for invoking the extended period were absent.
Conclusion: The demand was barred by limitation to the extent extended period was invoked. The finding is in favour of the assessee.
Final Conclusion: The appeal succeeded and the demand set aside, with consequential relief to the appellant.
Ratio Decidendi: Reprocessing of rejected goods into a distinct scrap product amounts to manufacture, and the extended period of limitation cannot be invoked absent suppression or conscious withholding of facts.
TaxTMI 
AI Drafter ✕
TaxTMI 
