Job-work removal of scrap not separately dutiable when converted goods return on duty-paid clearance and no suppression is proved.

Scrap removed to a job worker under Rule 4(5)(a) of the Cenvat Credit Rules, 2004 and converted into intermediate goods returned on payment of duty was not liable to a separate duty demand, as the job-work procedure applied and the initial removal was not a dutiable clearance. The extended limitation period was also unavailable because the removals and return clearances were reflected in delivery challans and records, and no positive suppression of facts or intent to evade duty was proved. The demand, interest and penalty were therefore set aside, with consequential relief.

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Issues: (i) Whether central excise duty was payable on scrap sent to job workers for conversion into intermediate products and returned on payment of duty; (ii) Whether invocation of the extended period was sustainable in the absence of deliberate suppression of facts.

Issue (i): Whether central excise duty was payable on scrap sent to job workers for conversion into intermediate products and returned on payment of duty.

Analysis: The removal of scrap to the job worker was undertaken under Rule 4(5)(a) of the Cenvat Credit Rules, 2004. It was undisputed that the job worker manufactured the intermediate goods and cleared them back to the appellant on payment of duty. The Board circular placed before the Tribunal recognised movement of scrap to a job worker for conversion and return, and the Tribunal applied the same principle to hold that the manufacturer could proceed under the job-work route rather than treating the initial removal of scrap as a dutiable clearance.

Conclusion: The demand of duty on the scrap was not sustainable and was decided in favour of the assessee.

Issue (ii): Whether invocation of the extended period was sustainable in the absence of deliberate suppression of facts.

Analysis: The removal of scrap and return of converted goods were recorded in the delivery challans and other records. The department did not establish any positive act of suppression or intent to evade duty. In the absence of such material, the extended limitation period could not be invoked.

Conclusion: The invocation of the extended period was unsustainable and this issue was decided in favour of the assessee.

Final Conclusion: The demand, interest, and penalty were set aside, and the appeal was allowed with consequential relief according to law.

Ratio Decidendi: Where scrap is sent for job work under the prescribed procedure and the intermediate goods are returned on payment of duty, no separate duty demand on the scrap is maintainable in the absence of proved suppression or intent to evade.

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