Job work scrap duty cannot be shifted to the input supplier where waste arises during processing, tribunal holds.

Duty on waste and scrap generated at a job worker's end during processing of inputs sent for job work cannot be fastened on the principal manufacturer or supplier of inputs under Rule 57AC / Rule 4(5)(a) of the Cenvat Credit Rules, 2002. The dispute turned on whether liability could shift to the supplier merely because the job worker allegedly did not discharge duty on the scrap. Applying binding precedent for the post-31.03.2000 period, the tribunal held that such duty liability remains with the person in whom it arises and cannot be transferred to the input supplier. The demand was accordingly not sustainable.

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Issues: Whether duty on waste and scrap arising at the job worker's end could be fastened on the principal manufacturer or supplier of inputs under Rule 57AC / Rule 4(5)(a) of the Cenvat Credit Rules, 2002.

Analysis: The scrap arose during processing by the job worker after inputs were sent for job work, and the dispute turned on whether the principal manufacturer remained liable for duty merely because the job worker allegedly had not discharged duty on the scrap. The issue was treated as covered by binding precedent holding that, for the relevant post-31.03.2000 period, duty liability on such scrap cannot be shifted to the supplier of inputs when the scrap is generated in the course of job work.

Conclusion: The duty demand on the appellant, as supplier of inputs, was held not sustainable and the appeal was allowed.

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