Rule 57F(2) clearance of waste and scrap to job workers cannot sustain duty demand or extended limitation

Waste and scrap cleared to job workers under Rule 57F(2) with departmental permission could not attract duty where the larger bench view treated such removal as an available option and the scrap was described as non-excisable; the duty demand on those clearances was therefore not sustainable. The demand also failed on limitation because the show cause notice alleged neither suppression nor misstatement with intent to evade duty and did not invoke the extended period under Section 11A, so the extended limitation period could not be applied. The personal penalty consequently did not survive.

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Issues: (i) whether duty could be demanded on waste and scrap cleared to job workers under Rule 57F(2) when the assessee had obtained departmental permission; (ii) whether the demand was barred by limitation in the absence of any allegation of suppression or misstatement in the show cause notice.

Issue (i): whether duty could be demanded on waste and scrap cleared to job workers under Rule 57F(2) when the assessee had obtained departmental permission.

Analysis: The clearance was made under Rule 57F(2) with the permission of the jurisdictional Central Excise authorities. The larger bench view recognized that the assessee had an option either to remove waste and scrap to job workers under Rule 57F(2) or to clear it on payment of duty under Rule 57F(4). The waste and scrap of PVC wires and cables was also treated as non-excisable, so the question whether the job workers had paid duty or whether the scrap returned to the assessee became immaterial.

Conclusion: No duty demand was sustainable on the waste and scrap cleared for job work.

Issue (ii): whether the demand was barred by limitation in the absence of any allegation of suppression or misstatement in the show cause notice.

Analysis: The demand covered a period beyond the normal limitation period, yet the notice did not allege suppression of facts or misstatement with intent to evade duty and did not invoke the proviso to Section 11A. In such circumstances, the extended limitation period could not be applied.

Conclusion: The demand was barred by limitation.

Final Conclusion: The appeal succeeded on both merits and limitation, and the duty demand and personal penalty did not survive.

Ratio Decidendi: Where waste and scrap are cleared to job workers under Rule 57F(2) with departmental permission, and the show cause notice contains no allegation warranting the extended period under Section 11A, a duty demand on such clearances cannot be sustained.

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