Cenvat credit and job-worker scrap liability cannot be fastened on the principal manufacturer where duty on scrap is properly paid

Demand for central excise duty, interest and penalty on alleged non-reversal of Cenvat credit relating to inputs contained in scrap generated at a job worker's end was found unsustainable. The assessee had discharged duty on the waste and scrap by valuing it with reference to similar scrap generated and sold from its own factory, and no contrary evidence displaced that valuation. The Tribunal also noted that an earlier order dropping the same demand for part of the same period had been accepted by the Revenue, so a contrary stand could not be taken. It further relied on settled post-1 April 2000 decisions that duty could not be fastened on the principal manufacturer for such scrap.

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Issues: Whether the demand of central excise duty, interest and penalty was sustainable on the alleged non-reversal of Cenvat credit relatable to inputs contained in waste and scrap generated at the job worker's end and not returned to the principal manufacturer.

Analysis: The appellant had paid duty on the waste and scrap after determining its value with reference to similar scrap generated and sold from its own factory, and the record contained no contrary evidence to dislodge that valuation. An earlier adjudication on the same issue for a part of the same period had dropped the demand, and that order had been accepted by the Revenue. The Tribunal held that the department could not take a contrary stand on the same issue, and that the earlier accepted order ought to have been followed. The Tribunal also relied on the settled line of decisions holding that, for the relevant post-1 April 2000 regime, duty liability could not be fastened on the principal manufacturer for scrap generated at the job worker's end.

Conclusion: The impugned demand, interest and penalty were unsustainable and were set aside.

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