Cenvat job work scrap not dutiable on principal manufacturer; demand, interest and penalty were unsustainable.

Rule 4(5)(a) of the Cenvat Credit Rules, 2004 did not create a separate excise duty liability on scrap generated at a job worker's premises merely because the scrap was not returned to the principal manufacturer. Consistent precedent had already held that waste and scrap arising during processing at the job worker's end need not be brought back, and duty cannot be fastened on the principal manufacturer on that basis alone. The contrary view in the impugned order was therefore unsustainable, and the demand, interest and penalty could not be maintained.

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Issues: Whether scrap generated at the job worker's premises during processing of inputs sent under the Cenvat credit scheme was liable to central excise duty at the hands of the principal manufacturer, and whether the demand, interest and penalty could be sustained.

Analysis: The appeal turned on the effect of Rule 4(5)(a) of the Cenvat Credit Rules, 2004 and the settled position that the provision permitting inputs to be sent to a job worker does not create a separate duty liability on scrap generated at the job worker's premises merely because the scrap was not brought back to the principal manufacturer's factory. The scrap was treated by the lower authority as excisable goods and as a final product, but the Tribunal noted that the issue was no longer res integra and that earlier decisions had consistently held that waste and scrap arising at the job worker's end were not required to be returned and duty could not be fastened on the principal manufacturer on that basis alone. The Tribunal also found that the contrary view in the impugned order could not be sustained in light of the prior consistent line of decisions.

Conclusion: Scrap generated at the job worker's premises was not liable to duty on the principal manufacturer in the present facts, and the demand, interest and penalty were not sustainable.

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