TaxTMI 
TaxTMI 
2023 (8) TMI 268
X X X X Extracts X X X X
X X X X Extracts X X X X
....s to be decided in the present cluster of appeal are (i) Whether, the appellant have properly followed the inputoutput ratio as per the statutorily prescribed norms of wastage, for the manufacturing of final goods, in terms and conditions of the aforesaid Notification No. 52/2003-CUS, or not; (ii) Whether, the clearance of brass scrap classified under the CTH, other than the CTH of import by the appellant was proper or otherwise. (iii) Whether, any manufacturing activity was carried out by way of segregation of the scrap, inasmuch as the adjudicating authority has held that since, the activity of segregation does not amount to manufacture as per the Export Import policy, no manufacturing was carried out and likewise the classification and value of the goods cleared in the DTA considering as wastage, was required to be considered as declared while importing. (iv) Peripheral issue on the anvil, in case of one of the appeal (No. V2/334/RAJ/2012) to be decided is also as to whether, the duty on slag generated in excess of 2% of the input quantity is to be recovered or otherwise along with the legal status of the imposition of interest and penalty is to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....of segregation carried out by them is one of the many processes leading to the manufacture of the finished goods and therefore, classifying the same under the main brass scrap heading for the purpose of charging duty and valuation, is incorrect. 8. Now, briefly understanding the nitty-gritty of the import of the brass scrap and its procedure by 100 % EOU units, I find that the brass scrap is imported by the various manufacturers/importers of the brass parts hailing from in and around Jamnagar, at the port of import. At the port of import, the container imported by 100 % EOUS laden with the brass scrap is superficially examined and from their under proper seal, it is transported to the factory premises of the appellant holding. 100 % EOU unit, which is virtually a sort of warehouse, allowing duty free storage of inputs for manufacture of the goods, which are to be eventually exported or dealt with as per the provisions applicable to 100% EOUS, as laid down under the said Notification, as also as per the Foreign Trade Policy. At warehouse/EOU, imported scrap is unloaded in the presence of the party or the assessee (appellant) concerned, who imported such scrap, as well as th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in case of utilization of a large number of inputs, wide variation in quantum of consumption of inputs or such other factors which render such fixation of SION difficult in the case of a particular unit, the Norms Committee may refer the case to the Board of Approval for a decision.": in the paragraph 4, after the second proviso, in the clause (u) (a), for the words "such clearance or debonding of capital goods may be allowed on payment of duty on the depreciated value thereof and at the rate in force on the date of debonding or clearance. as the case may be", the following shall be substituted, namely:- "such clearance or debonding of capital goods may be allowed on payment of duty on the depreciated value thereof and at the rate in force on the date of debonding or clearance, as the case may be, if the unit has fulfilled the positive NFE criteria taking into consideration the depreciation allowable on the capital goods at the time of clearance or debonding. In case of failure to achieve the said positive NFE, the depreciation shall be allowed on the value of capital goods in the same proportion as the achieved portion of NFE": after paragraph 13, in the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Committee in terms para 6.8(e) of the FTP 2009- 14. which was intimated by DGFT, New Delhi, vide letter F. No. 01/81/162/313/AM 10/DES-11/254 dated 04.05.2011 to the Development Commissioner, KSEZ, Gandhidham, and provisions of the said Notification No. 52/2003-Cus, as amended, in respect of the appellant i.e. M/s Deep Recycling Industries, Jamnagar. 10.3 I find that the Norms Committee, while fixing the wastage norms in two stages of manufacturing had observed that: "Dated: 04.05.2011. To The Development Commissioner, Office of the Development Commissioner, Kandla Special Economic Zone (KSEZ), Gandhidham-Kutch, Pin-370320 (Gujarat). Sub: Fixation of wastage norms in terms of Para 6.8(e) of Foreign Trade Policy, 2009-14 for the manufacture of brass items. I am directed to refer to your letter No. dated.... on the above mentioned subject and to inform that based on the recommendations of a team of Norms Committee which visited EOUS, manufacturing brass iterns from mixed metal brass scrap in Jamnagar area, the following wastage nors are fixed in terms of Para 6.8 (e) of Foreign Trad....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ew Delhi." (Emphasis supplied) So what can be perceived from the above extraction, is that wastage norms have been fixed for two stages, one at segregation stage and another for manufacture stage, by the statutory Norms Committee. Detailed findings in respect of the aforesaid letter fixing wastage norms are given at ensuing paras of this order. However, as may be seen from the above statistics of the wastage worked out by the Norms Committee, it can be seen that wastages upto whopping 33% has been granted at the first stage and from 7% to 25% (approx) has been granted at the second stage. 10.4 Furthermore, I observe that though the activity of segregation was NOT covered under the definition of "manufacture" w.e.f. 01.04.2002, as clarified under para 9 of Appendix 14-1-C titled "Sector Specific Requirements for EOU Units" of the FTP 2004- 09, and as held by the lower adjudicating authority in the impugned order, Hind that the said activity being essential for carrying out further manufacturing activities by the appellant, the same seems to have been relaxed and allowed by the Norms Committee, vide the aforesaid letter supra dated 04.05.2011, in term....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the appellant, should be, per se, prima facie, within the limits, as fixed and prescribed by the Norms Committee. I further find that the appellant, along with appeal memorandums, had also submitted the month-wise quantitative statement showing consumption of imported raw material, clean brass scarp obtained after segregation along with quantity of goods manufactured and quantity of scrap obtained, from which it is quite apparent that the Inputoutput ratio was, prima facie, well within the norms, as fixed by the Norms Committee. The appellant had also contended, while submitting the quantitative month- wise statement/s, that wastages were well within the prescribed limits, as specified by the Norms Committee, and therefore, the ratio of input-output norms followed by the appellant should be held to be acceptable and no demand in this regard, should be confirmed. However, I find that there are multitudes of cases requiring such verifications of the data, and for this appellate office, it would not be possible to verify all the quantitative data and worksheets submitted by the appellant, in accurate and precise manner, owing to the frugal infrastructure and time co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....upplied to 'only') and had not consumed 'normal brass scrap or honey scrap! (which is normally a pure brass scrap, as per ISRI), during the segregation/ manufacturing process of goods, on which the above referred input-output ratio has been calculated, shall be verified by calling for the container-wise necessary import documents. The appellant may also be asked to produce the documents of the overseas supplier of the brass scrap, like, Bill of Lading and Import Invoice to ascertain the exact composition nature of the brass scrap. As the norms fixed by the norms committee is only applicable to the consignment and the party who imported "Brass scrap containing impurities like iron and steel, plastic/ rubber etc.", carrying out such exercise by the jurisdictional authorities is of prime importance. (c) To reiterate for the sake of clarity, the verification of veracity of the data contained in the monthly quantitative statements submitted by the appellant, in the appeal memorandum, is required to be carried out by the jurisdictional Central Excise authorities, who after satisfying himself about the stage-wise consumption of 'brass scrap with impurities' an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....astic/ rubber scarp, which was not used further in the course of manufacturing of export goods and was cleared under the respective Customs Tariff Headings of 7202 and 4017. As the segregation of non- foundry scarp obtained from 'mixed metal brass scrap with impurities' was allowed by the Norms Committee, Inspite of not satisfying the definition of 'manufacture', it would not be proper to uphold the views of the lower adjudicating authority to classify the same under the CTH of 7404 and demanding the customs duty forgone at the time of import on the basis, that the same had not undergone the activity of manufacturing activity. Therefore, 1, in principle, hold that the individual classification adopted by the appellant at the time of clearance was appropriate. However, the benefit of this issue to the appellant, also hinges upon the main issue, for which they are in first place, required to satisfy and prove to the jurisdictional Central Excise authority, along with cogent documentary evidences, that they have imported and used the 'Brass scrap with impurities', of the type and ilk, for which the Norms Committee have fixed norms. However, if the appellant are....
X X X X Extracts X X X X
X X X X Extracts X X X X
....when any excess wastages, over and above 2%, as held liable to duty implication in the impugned order, would stand upheld. 14. The appellant, had lastly also contended that the similar issue has been allowed by the Additional Commissioner, Central Excise, HQ, Rajkot qua the adjudicating authority, and the then Commissioner (Appeals), Central Excise, Rajkot, however, I find that the same are either passed by the lower adjudicating authority or the parallel authority and I would not be bound under the canons of jurisprudence to deviate from the stand already taken by such authorities, if at all the same is different from this order. Furthermore, the reason for digressing, if at all, from such decisions is also amply palpable by way of my discussion and findings hereinabove, in this order. 15. Needless to state that since the demand of duty and confiscation has been subject to the verification. The same would not be imposable, in a situation if the appellant proves the jurisdictional authorities, about the applicability of the wastage norms fixed by the Norms Committee, to their cases. However, in case of failure to prove such fact, I see no reason to interfere with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The foreign materials, emerging during the process of segregation have to be treated as process waste and cannot be treated like removal of inputs as such. The segregated foreign material has an altogether different character and use vis-à-vis brass scrap. Accordingly, clearance of foreign material such as iron, steel, rubber, plastic, dust etc. cannot be treated as clearance of inputs as such. It may be noted that Circular No. 62/2001Cus., dated 12-11-2001 (2001 (134) ELT (T39)] does not apply to the issue at hand as the facts at hand are different." 4. In view of above, it is clarified that the clearance of segregated foreign materials namely iron, steel, rubber, plastic, dust etc, from honey grade brass scrap before feeding in the furnace cannot be treated as removal of "input as such" as envisaged under Rule 3(5) of CENVAT Credit Rules, 2004. The segregated foreign material in such situation, as has been explained above, shall be cleared on payment of Central Excise duty on transaction value as per its appropriate classification and rate of duty determined on merits." 4.2 He pointed out that in para 4 of the aforesaid circular, clearly recognizes that remov....