Captive consumption of aluminium scrap within the factory attracts exemption, and extended limitation needs specific suppression allegations.

Aluminium scrap generated and consumed captively within the same factory under a labour contract was not to be treated as cleared for outside job work, because the melting and conversion into billets or ingots took place on the assessee's premises under its supervision and the finished goods were duty-paid; the scrap therefore qualified for the benefit of Notification No. 67/95-CE, and the duty demand failed on merits. The demand also could not survive under the extended limitation period, because the notice contained no specific of fraud, collusion, suppression of facts, or intent to evade duty, while the scrap had been disclosed in the classification list and exemption had been claimed openly. Relief was therefore warranted on both merits and limitation.

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Issues: (i) Whether aluminium scrap generated in the factory and processed within a separate melting shed by labour supplied under a contract was liable to duty as though it had been cleared for job work outside the factory; (ii) Whether the demand was sustainable in the absence of allegations attracting the extended period of limitation.

Issue (i): Whether aluminium scrap generated in the factory and processed within a separate melting shed by labour supplied under a contract was liable to duty as though it had been cleared for job work outside the factory.

Analysis: The contract required the appellant to provide the materials and melting facilities, with the melting to be done within the appellant's own premises under its supervision. The record also showed that the scrap was not sent outside the factory, but was converted within the approved factory premises into billets or ingots using labour supplied by BFEW. The adjudicating authority did not rebut these factual assertions. Since the billets or ingots were cleared on payment of duty, the scrap used captively for their manufacture fell within the protection of the exemption claimed under Notification No. 67/95-CE. The classification list filed by the appellant also disclosed the scrap and claimed the benefit of that notification.

Conclusion: The scrap was not liable to duty on the footing of outside job work clearance, and the demand failed on merits.

Issue (ii): Whether the demand was sustainable in the absence of allegations attracting the extended period of limitation.

Analysis: The notice invoked the proviso to Section 11A(1) of the Central Excise Act, 1944, but it did not allege fraud, collusion, suppression of facts, or any intent to evade duty. The appellant had disclosed the scrap in the classification list and claimed exemption for captive consumption, which negatived any foundation for invoking the extended period.

Conclusion: The demand was time-barred and could not be sustained under the extended period.

Final Conclusion: The duty demand was unsustainable both on merits and on limitation, and the assessee was entitled to relief.

Ratio Decidendi: Scrap manufactured and consumed captively within the same factory under a labour contract is not to be treated as having been cleared for job work outside the factory, and the extended limitation period cannot be invoked without specific allegations of suppression, fraud, collusion, or intent to evade duty.

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