Job-work exemption for manufacturing scrap applies when brass scrap is reprocessed and returned for further use in manufacture.

Scrap generated during manufacture and sent to a job worker for remelting or reconversion into material to be used again in manufacture may be cleared without payment of duty under the job-work/CENVAT exemption framework, where the binding majority view treats such scrap as capable of reprocessing for further manufacturing use. The commentary notes that the contrary minority view in Wyeth Laboratories Ltd. is not the controlling precedent, and that the principle has been affirmed and followed in later decisions. On that basis, a demand for duty, along with penalty and interest, is not sustainable when the lower authority relies on the minority view and the returned goods are used again in manufacture.

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Issues: Whether brass scrap generated during manufacture and sent to a job worker for remelting and conversion into brass wires could be cleared without payment of duty under Rule 4(5)(a) of the CENVAT Credit Rules, 2004 read with Notification No. 214/86-CE dated 25.03.1986, and whether the demand, penalty and interest could be sustained.

Analysis: The Tribunal held that the controversy was no longer res integra and was governed by the Larger Bench ruling in Wyeth Laboratories Ltd., which confined the expression relating to waste to material not intended to be used again in manufacture and recognised that scrap, by-product or waste may be reprocessed or reconverted for use in manufacture depending on commercial and technological considerations. The Tribunal also noted that the Larger Bench view had been affirmed by the Supreme Court in Binani Zinc Ltd. and followed in later decisions. The orders below were found to have proceeded on the minority view in Wyeth Laboratories Ltd., whereas the majority view constitutes the binding precedent. Since the brass scrap was sent for job work and returned as brass wires for use in manufacture, the demand could not be sustained.

Conclusion: The brass scrap could be sent for job work without payment of duty in the facts of the case, and the duty demand, penalty and interest were not sustainable.

Final Conclusion: The appeals succeeded and the impugned orders were set aside, with consequential relief as available in law.

Ratio Decidendi: Where scrap or waste generated in manufacture is sent for job work for reprocessing or reconversion into material used again in manufacture, the binding majority view on the relevant pari materia exemption/job-work provision governs and the demand cannot be sustained if the lower authority relies on a minority view.

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