Job-worker scrap valuation upheld, cum-duty benefit allowed for process loss, and penalty limited to the revised duty component.

Scrap generated at a job worker's premises could not be revalued by adopting the higher price of scrap from the assessee's own factory because no evidence showed a higher actual realisation; duty was correctly computed on the mutually accepted value of Rs. 4 per kg. Cum-duty benefit was allowed for burning loss and irrecoverable scrap where no sale consideration had been recovered, and fresh duty computation was directed on that basis. Penalty under Section 11AC was confined to 25% of the redetermined duty liability relating only to the irrecoverable-loss component.

---

---

Issues: (i) Whether the assessable value of scrap generated at the job worker's premises could be enhanced from Rs. 4 per kg to Rs. 5.80 per kg for duty computation; (ii) whether cum-duty benefit was available on burning loss or irrecoverable scrap on which no sale consideration had been recovered; (iii) whether penalty under Section 11AC was sustainable and, if so, to what extent.

Issue (i): Whether the assessable value of scrap generated at the job worker's premises could be enhanced from Rs. 4 per kg to Rs. 5.80 per kg for duty computation.

Analysis: The scrap at the job worker's end was valued by mutual arrangement at Rs. 4 per kg, and duty had been discharged on that basis. The higher value adopted by the department was based on the price of scrap generated at the appellant's own factory, which was not a comparable basis for scrap arising at the job worker's premises. No evidence was produced to show that the job worker had actually sold the scrap at a higher price.

Conclusion: The adoption of Rs. 4 per kg was upheld and no further duty demand survived on the physically available scrap already accounted for at that value.

Issue (ii): Whether cum-duty benefit was available on burning loss or irrecoverable scrap on which no sale consideration had been recovered.

Analysis: The demand relating to process loss and irrecoverable scrap was conceded in principle, but the relevant quantity had not been sold and no duty element had been recovered from any purchaser. In such circumstances, the notional value could be retained at Rs. 4 per kg, but the duty computation had to extend cum-duty benefit.

Conclusion: Cum-duty benefit was allowed for the quantity attributable to burning loss and irrecoverable scrap, and the matter was remanded for fresh calculation on that basis.

Issue (iii): Whether penalty under Section 11AC was sustainable and, if so, to what extent.

Analysis: Since the duty had already been paid at the rate of Rs. 4 per kg before issue of the show cause notice, the penal provision was attracted only to the redetermined duty relating to the irrecoverable loss component. The penalty was therefore confined to the statutory reduced quantum linked to the revised duty liability.

Conclusion: Penalty was restricted to 25% of the redetermined duty liability on the quantity relatable to burning loss and irrecoverable scrap.

Final Conclusion: The valuation adopted by the assessee for job-worker scrap was accepted, cum-duty benefit was granted for process loss, and the matter was remanded only for recomputation of duty and consequential penalty on the limited irrecoverable-loss component.

Ratio Decidendi: In the absence of evidence of a higher actual realisation, scrap generated at a job worker's premises cannot be revalued on the basis of scrap from the assessee's own factory, and cum-duty treatment applies where no sale consideration has been recovered for the relevant loss quantity.

---