Provision related for retaining the Generated Scrap with assessee.

[Asked by Guest]

Respected Sir, We’re doing Machining job of Loco Blank Wheel, which is supplied by Durgapur Steel Plant (Manufacturer) on job work basis. The said wheels (Semi finished) come our workshop under Annexure II Challan We’ve an agreement with M/s. Durgapur Steel Plant in this regard that Turning/ Boring or Scrap which is generated during the process/ machining of said Wheels shall be retained by us as at free of cost with a condition of to pay excise duty on generated Scrap/ Boring and evidence of such payment should be deposited before Competent authorities of M/s. Durgapur Steel Plant. After receiving the above evidence they release our payment for machining charges of wheels, these are the main clause of MOU which has signed by DSP and our Company and I’m writing the exact word of clause :- “Turning/Boring arising out of machining operation will retained by M/s. MCC (P) LTD free of Cost but they will pay excise duty and cess on turning/ boring under rule 57F(4) under the Central Excise Rules,1944 evidence of such payment will be submitted to DSP on monthly basis and it will covered under above Bank Guarantee” Presently Central Excise Department pressurised upon DSP’s Authorities to take back of Scrap/ Turning/ Boring which is generated during the course of machining of wheels but DSP has not interested to take back the said Scrap due to their difficulties of additional burden of paper work, Inventories and other formalities . Further we want retained of scrap with us for sale purpose with payment of excise duty and cess as per Central Excise Act and Rules because DSP does not paid adequate amount for Machining of Wheels Is any provision in Law can support us for retaining the Generated Scrap with us and Excise Department not to pressurised to DSP Authorities for take back of Scrap

AI Summary

Job work scrap disposal: permission required for direct sale; principal not liable for duty if scrap generated at job worker.
Rule 4(6) read with Rule 4(5) of the Cenvat Credit Rules mandates return of goods sent on job work to the principal's premises and requires prior permission from the Assistant Commissioner/Deputy Commissioner where a job worker proposes to sell scrap directly. Tribunal authorities have held that where scrap is generated at the job worker's end and no manufacture of scrap occurred at the principal's premises, duty cannot be imposed on the principal, and penalties for clearance without permission are unsustainable where the rule relied on does not apply.