TaxTMI 
TaxTMI 
2009 (3) TMI 444
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....of appropriate duty. The short point involved is whether the value of the scrap obtained by the appellants while doing the job work is to be included in the assessable value of the goods manufactured by them. This is the main issue. The revenue has proceeded against the appellants on the ground that they had not included the said value and therefore, duty as per the Show Cause Notice has been confirmed for the period from 31-1-2002 to 31-8-2005. The Show Cause Notice has been issued on 25-5-2006. Penalty equal to the duty demanded has also been imposed. The appellants are highly aggrieved over the impugned order, hence they have come before this tribunal for relief. 5. The appellants have been doing the job work from 31-1-2002. For the conversion the raw materials namely blooms/billets would be supplied by WIL and same is lifted from the supplier, who in most cases is Visakhapatnam Steel Plant (VSP). It is also stated that from 2002 to June 2005, WIL supplied VSP blooms that were rolled to narrow slabs at M/s. Sarita Steel & Industries Limited (Sarita, for short) on conversion basis and the narrow slabs were received by the appellants. From June 2005, rolling at Sarita was stopped....
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....ses or is returned to the raw materials suppliers and separate duty, in any case is being paid on the value of the scrap at the rate applicable to the scrap. Against the final order of the Tribunal, the department filed an appeal before the Supreme Court. A Three-Judge Bench in its order dated 9-3-2005 directed that a Cost Accountant report should be obtained. Subsequently, the department placed on record the Cost Accountant's report. Based on this report, the Apex Court vide its order dated 25-1-2006 remanded the matter back to the Hon'ble Tribunal for re-hearing the matter with reference to the report of the Cost Accountant as reported in 2006 (203) E.L.T. A184. 5.2 It was also urged that without noting the above order dated 9-3-2005 or its earlier decisions dated 25-9-2003 in the case of Union Carbide v. CCE reported in 2003 (158) E.L.T. 15 (S.C.), the Hon'ble Supreme Court vide its decision rendered on 10-3-2005 in the case of General Engineering Works v. CCE reported in 2007 (212) E.L.T. 295 (S.C.) took a view that the value of scrap has to be included again. The Apex Court however, on 25-1-2006 did not refer to the above decision in General Engineering Works (supra) and rema....
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..... 637 & 638/2008 dated 29-5-2008 [2008 (232) E.L.T. 348 (Tribunal)] this Bench has also held that value of scrap which is already included in the cost of raw materials supplied to the job worker again cannot be added to the job charges. 5.6 Another point which was pleaded is that the appellants received raw materials, took cenvat credit, did the job work and cleared the product in question which is an intermediary product. The credit availed on the raw materials were utilized by the appellants for the payment of duty M/s. WIL subsequently availed the credit of duty paid on the finished goods. The Hon'ble Supreme Court in the case of International Auto Limited reported in 2005 (183) E.L.T. 239 (S.C.) has held that the job worker is not liable to pay duty on the intermediate product when duty is paid on the final product. 5.7 The Mumbai Bench of the Hon'ble Tribunal in the case of M/s. Lawkim Limited, vide their Final Order No. A/283-285/07/WZB/C-l/EB dated 28-3-2007 reported in 2007 (218) E.L.T. 142 (Tri. -Mumbai) has held in an identical circumstances when the demand was on the value of the scrap allowed to be retained by the job worker, then the job worker is not liable to pay d....
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.... own as well as the goods removed after job work. 5.12 It was submitted that the quantification is incorrect as the demand includes invisible losses in the course of manufacture, scrap generated at sub-contractor's premises and scrap generated on their production for outright sale, example, other than jobwork. 5.13 The point made by the appellant is that the entire difference between the quantity of raw material supplied and the resultant output does not represent the waste/scrap, which has been sold and the sale proceeds realized. In respect of the finished products made out of billets, 17.5% of the output for the period upto May 2005 and 16% of the output for the period from June 2005 have been calculated as realizable scrap. Similarly, for the productions out of blooms, 25% of the output for the period upto 28-6-2005 and 19.5% of the output for the period from 29-6-05 has been estimated to have been generated as realizable scrap. It was submitted that this assumption is totally incorrect, in view of the various invisible losses. 5.14 It was also stated that the processes undertaken at Sarita resulted in an invisible loss and realizable scrap of about 6% at their end. For ever....
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....etween the noticee and M/s. WIL for the relevant period. It was submitted that a perusal of the relied upon documents itself which is the basis of the show cause notice would show that the allegation of suppression of facts with an intention to evade payment of duty is factually incorrect end legally unsustainable. Monthly ER1 returns relied upon is a statutory return filed by the appellants month after month. There cannot be, therefore, any supression which can be alleged against the appellants based on these documents. In view of the above, it was pleaded, that invocation of the longer period on the allegation of suppression of facts cannot be sustained. The purchase order and annexure to the purchase order were made available to the authorities. The fact that the scrap is retained at the hands of the job worker is explicit in terms of the purchase order itself. 5.19 In case the authorities entertained a view that the value of the scrap retained by them is to be included on the ground that it has not been returned to M/s. WIL, this action could have been initiated immediately on receipt of the intimation vide their letter dated 29-1-2002. Therefore, it was submitted that the au....
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....Visakhapatnam Steel Plant. These raw materials are given to the appellant for conversion. A similar issue was dealt by the Supreme Court in the case of General Engineering Works (supra) and it was held that in such circumstances the value of the scrap should be included to the value of the goods produced by the job worker. However, similar issue was considered by the Hon'ble Apex Court in the case of International Auto Ltd. cited supra. In that case, the appellant was a job worker for floor plate assemblies for TELCO. The said assemblies were used by TELCO in the manufacture of excavators. TELCO supplied inputs to the appellant for the purpose of manufacture of assemblies on which credit had been taken by TELCO. The appellant used TELCO's inputs as well as its own inputs in manufacturing the assemblies. It cleared the assemblies from its factory upon payment of excise duty on the completed floor plate assemblies by including the value of only the inputs put in by the appellant and adding, thereto, its service charges. However, revenue proceeded against the appellants with a show cause notice proposing the inclusion of the value of TELCO's inputs in the assemblies for the purpose of....
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.... by the assessee taking the Cenvat credit that the goods are received back in the factory within one hundred and eighty days of their being sent to a job worker and if the inputs or the capital goods are not received back within one hundred eighty days, the manufacturer shall pay an amour equivalent to the Cenvat credit attributable to the inputs or capital goods by debiting the Cenvat credit or otherwise, but the manufacturer can take the Cenvat credit again when the inputs or capital goods are received back in his factory." In such a situation, a job worker who manufactures the intermediate product, is not liable to pay any duty thereon. 6.Rule 4(6) provides that the Commissioner of Central Excise having jurisdiction over the factory of the manufacturer of the final products who has sent the inputs or partially processed the inputs outside his factory to a job worker, may allow final products to be cleared from the premises of the job worker subject to such conditions as he may impose in the interest of revenue including the manner in which duty, if leviable, is to be paid. A combined reading of the above rules would clearly show that where a person is taking Cenvat credit on t....
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....rred to Larger Bench of Tribunal which vide its order reported in 2000 (119) E.L.T. 718, held that Jay Yuhshin had suppressed the fact of non-inclusion and, therefore, short levy was due to such suppression. The Bench rejected the contention that there was no intention to evade payment of duty as the entire duty paid by Jay Yuhshin was available as credit to MUL. Following the Larger Bench's decision, the Division Bench of the Tribunal upheld the Commissioner's order and rejected the appeal of the assessee, in its order reported at 2001 (137) E.L.T. 1098. The matter was carried in appeal to the Apex Court which, vide its decision cited supra, held as under:- "6. We are of the view that the submission of the appellant is correct. The Tribunal appears to have been confused between the manufacture of the final product, namely, excavators and the manufacture of the intermediate product, namely, the floor plate assemblies. The scheme of Modvat permits the person who clears the ultimate final product to take the benefit of the Modvat scheme at the time of clearance of such final product. The manufacturer of the final product, in this case TELCO, would therefore, be entitled not only to ....
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....s judgment cited supra, namely that the movement of inputs from raw material supplied to job worker was under Modvat Rules in the Jay Yuhshin's case while in the present case, movement of goods purchased by Tecumseh Products India Pvt. Ltd. and supplied to Lawkim Ltd. was not under Modvat Rules, does not exist. The decision in the case of Mahindra Ugine Steel Co. Ltd. (Final Order No. A/60-63/07/C-1 dated 23-1-2007 [2007 (211) E.L.T. 73(T)]) holding that value of scrap/waste retained by the job worker is to be included in the value of components manufactured on job work basis as realization of sale proceeds would amount to additional consideration, relied upon by the learned SDR to support the findings of the Commissioner, does not come to the rescue of the Revenue, in view of the fact that in the International Auto case, the Apex Court has distinguished the decision in Burn Standard Co. Ltd. [1990 (60) E..L.T. 671 (S.C.)] which was relied upon by the Tribunal in the Musco case, as seen from Paragraph 6 of the International Auto judgment. 8.The ratio of the International Auto Ltd. judgment is applicable on all fours to the facts of the present case and following the ratio thereof,....