2018 (3) TMI 849 - AT - Central Excise

Manufacturer not liable for Central Excise duty on waste & scrap from job worker premises

The appellant was found not liable to pay Central Excise duty on scrap generated at the job worker's premises, for which credit notes were issued by the ... Whether the appellant is required to be saddled with Central Excise duty on value of scrap generated at the job worker's premises for which a credit note was issued by the job worker or otherwise? Held that: - It is settled law, Central Excise duty on waste and scrap generated during the manufacture of finished goods has to demanded from the manufacturer of the final products, which in this case is the job worker - demand not warranted - appeal allowed - decided in favor of appellant. Issues:Whether the appellant is liable to pay Central Excise duty on the value of scrap generated at the job worker's premises for which a credit note was issued by the job worker.Analysis:The appeal considered the issue of Central Excise duty liability on scrap generated at the job worker's premises. The appellant, a manufacturer of Ms billets, sent raw materials for job work, resulting in finished goods like angles and channels. The job worker issued credit notes to the appellant for waste and scrap generated, adjusting payment for job work charges. The Revenue argued that the appellant should pay Central Excise duty on the scrap sold via book adjustment. The Authorized Representative cited previous cases where the duty liability for waste and scrap generated at the job worker's premises was held to be the job worker's responsibility.The Departmental Representative contended that the appellant received a credit note for scrap generated at the job worker's premises, indicating a sale to the job worker. The appellant did not record the production and clearance of waste and scrap or raise invoices for their sale. The Representative relied on a Tribunal decision stating that Central Excise duty should be paid on waste and scrap generated at the job worker's premises.Upon review, it was established that the waste and scrap were generated at the job worker's premises and cleared by the job worker as waste from his factory. The job worker converted billets into finished goods, making them the manufacturer of the final products where waste and scrap were generated. The Tribunal found that duty on waste and scrap during the manufacture of finished goods should be demanded from the manufacturer of the final products, in this case, the job worker. Relying on previous Tribunal decisions, the impugned order was deemed unsustainable, set aside, and the appeal allowed with consequential reliefs.This judgment clarified the duty liability for waste and scrap generated at job worker's premises, emphasizing that the duty should be borne by the manufacturer of the final products, not the appellant sending raw materials for job work.