Job work scrap duty calculation

[Sunil Jagtap]

Material movement --- Aluminum foil sent to Job worker for printing – printed foil returned to us along with scrap/waste.

Now it is to be clarified that whether the scrap generated out of such normal manufacturing activity at Job work point, attracts, reversal of CENVAT credit already claimed at the time of purchase of material from vendor?

If CENVAT is to be reversed whether the value is to be taken as input value i.e., the rate purchased from vendor or the scrap rate which we are going realize at the time of sale of scrap.

Kindly clarify the same.

[Rajagopalan Ranganathan]

Sir,

Aluminium scrap is classifiable under sub-heading No. 76020090 attracting duty @12.5%. Therefore you have to pay duty on the transaction value of such scrap, that is, the sale price of the scrap. You need not reverse any credit taken aluminium foil.

[Suryanarayana Sathineni]

Dear Sunil,

I agree with the view of Mr. Ramachandran and there is no need further clarity. However, I give the following views

1. The waste aluminium foil generated during job work is not an input to pay/reverse the duty of credit taken or proportionate amount for that matter.

2. Since it is a waste, duty at the applicable rated need to be paid on the transaction value or the value at which the waste is sold.

3. Since, the same is generated during the process, the transaction should be entered in Daily Stock Account

Best Regards

Surya

[Mahir S]

Yes sir, both the views expressed above are correct.

Further to add to clear the doubt that the scrap returned from job worker has to be cleared on payment of duty just like any other aluminum scrap being cleared from the factory premises.

AI Summary

Duty on scrap: scrap from job work is dutiable on transaction value and does not require CENVAT reversal.
Scrap generated during job work of aluminium foil does not require reversal of previously claimed CENVAT credit; duty must be paid on clearance of the scrap assessed on the transaction value (the sale price). Such scrap should be cleared on payment of duty like other factory scrap and recorded in the Daily Stock Account.