Job work scrap duty liability confined to job worker; principal manufacturer cannot be taxed merely for non-return of scrap.

Rule 4(5)(a) of the Cenvat Credit Rules, 2002 was applied to hold that waste and scrap generated at a job worker's premises need not be returned to the principal manufacturer. The scrap, if otherwise assessable, remained taxable in the hands of the job worker, and central excise duty could not be fastened on the principal manufacturer merely because the scrap was not brought back to its factory. In the absence of any contrary legal basis, the demand on the principal manufacturer was held unsustainable and was set aside.

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Issues: Whether the principal manufacturer was liable to pay central excise duty on waste and scrap generated at the job worker's premises and not returned to the principal manufacturer.

Analysis: The dispute was governed by Rule 4(5)(a) of the Cenvat Credit Rules, 2002. The settled view, followed in the earlier connected matter and supported by prior Tribunal and High Court decisions, was that the rule does not compel return of waste and scrap generated at the job worker's end. The waste and scrap remained assessable, if at all, in the hands of the job worker, and no duty liability could be fastened on the principal manufacturer merely because the scrap was not brought back to its factory. In the absence of any contrary legal basis, the confirmed demand could not be sustained.

Conclusion: The duty demand against the principal manufacturer was not sustainable and the issue was answered in favour of the assessee.

Final Conclusion: The impugned order was set aside and the appeal was allowed, with the demand on waste and scrap generated at the job worker's premises failing in toto.

Ratio Decidendi: Rule 4(5)(a) of the Cenvat Credit Rules, 2002 does not require return of waste and scrap generated at a job worker's premises, and no central excise duty on such scrap can be demanded from the principal manufacturer on that basis.

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