Excise duty not applicable on damaged moulds for reprocessing under Rule 4(5)(a). Member overturns demand (5)(a)

The demand for excise duty on damaged/defective moulds cleared for reprocessing and remaking under Rule 4(5)(a) was found unwarranted by the Member (Judicial). The clearance of such moulds after use was deemed to be covered by the rule, as it constituted the removal of inputs for further processing by the job worker. Citing precedent and settled law, the Member overturned the impugned order, allowing the appeals and setting aside the excise duty demand.

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Issues:
- Whether the demand of excise duty on damaged/defective moulds cleared for reprocessing and remaking under Rule 4(5)(a) is valid.

Analysis:
The appellant used moulds for manufacturing their final product, which, after a substantial period of use, became damaged and defective. These defective moulds were sent to a job worker for reconditioning and remaking under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The job worker then returned the remade moulds to the appellant for further use in manufacturing the final product. The department contended that the clearance of damaged moulds constituted waste and scrap arising from the final product's manufacture, requiring payment of duty instead of being covered under Rule 4(5)(a).

The appellant's counsel argued that the issue had been settled by a five-member Larger Bench of the Tribunal in the case of Wyeth Laboratories Ltd. vs. CCE, Bombay. Additionally, the counsel cited other judgments supporting the appellant's position. The Revenue representatives maintained the findings of the impugned order.

Upon careful consideration of the submissions, the Member (Judicial) found that the demand for excise duty on damaged/defective moulds cleared for reprocessing and remaking under Rule 4(5)(a) was unwarranted. The Member reasoned that since the appellant had initially availed cenvat credit for purchasing the moulds, their clearance after use, even in a damaged state, constituted the removal of inputs for further processing by the job worker. This removal was deemed to be correctly covered by Rule 4(5)(a) of the Cenvat Credit Rules, 2004. The Member highlighted that the issue had already been settled in favor of the assessee by the Larger Bench in the case of Wyeth Laboratories Ltd.

Consequently, the impugned order demanding excise duty on the damaged/defective moulds was set aside, and the appeals were allowed.

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