Forgings (India) Iron & Steel Limited Vs Commissioner of CGST & Excise (CESTAT Kolkata)
CESTAT Kolkata held that as waste and scrap are not manufactured goods the legislature have consciously not made any provisions for reversal of any credit taken on duty paid inputs in case of clearance of waste and scrap
Facts- The issue involved in the present appeal is as to whether the credit attributable to the inputs contained in waste and scraps, which have not been received from the job worker, is required to be reversed or not.
The Appellant is engaged in the manufacture of various steel forgings as per the drawing and specification of customers falling under Chapters 72, 73 & 84 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellant got some of their goods manufactured through job-workers for which they sent inputs/semi-finished inputs from their factory to various job-workers in terms of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, after taking Cenvat Credit on inputs.
The semi-processed/semi-finished inputs after being processed by job workers were returned to the Appellant. It appears to Revenue that there were always shortages in the number of processed inputs received back by the Appellant. The processed inputs were in lesser quantity than the quantity sent for job work. It appeared that the appellant was not reversing Cenvat credit attributable to inputs contained in the material not received back (waste and scraps).
It was alleged that the assessee had never disclosed the exact quantum of goods, which were short-received by them after job work as well as they did not reverse any such amount. Show-cause Notice further observed that a part of the goods sent for job work by the Assessee under Rule 4(5)(a) of Cenvat Credit Rules, 2004, were not returned even after the expiry of 180 days.
Conclusion- In the case of M/s. Rocket Engineering Corpn. Ltd. and in the case of M/s. Emco Ltd. v. CCE, Mumbai, 2008 (223) E.L.T. 613 (Tri.-Mum.), it was held that waste and scrap used at the end of job worker cannot be held to be dutiable in the principal manufacturer’s hands.
Held that the waste and scrap are not manufactured goods whether they are generated at the premises of the principal manufacturer or the premises of a job-worker and the legislature have consciously not made any provisions for reversal of any credit taken on duty paid inputs in case of clearance of waste and scrap and/or, their non-return from the job worker’s premises under the Central Excise Rules, 2002 read with Cenvat Credit Rules, 2002/2004.
FULL TEXT OF THE CESTAT KOLKATA ORDER
The present appeal filed by the Appellant, M/s Forgings (India) Iron and Steel Limited, arises from Order-in-Appeal No.25/Kol.II/2017 dated 25.04.2017 passed by Commissioner (Appeals), Kolkata.
2. The issue involved in the present appeal is as to whether the credit attributable to the inputs contained in waste and scraps, which have not been received from the job-worker, is required to be reversed or not.
3.1 The Appellant, M/s Forgings (India) Iron and Steel Limited, is engaged in the manufacture of various steel forgings as per drawing and specification of customers falling under Chapters 72, 73 & 84 of the First Schedule to the Central Excise Tariff Act, 1985. The Appellant got some of their goods manufactured through job-workers for which they sent inputs/semi-finished inputs from their factory to various job-workers in terms of Rule 4(5)(a) of the Cenvat Credit Rules, 2004, after taking Cenvat Credit on inputs. The semi-processed/semi-finished inputs after being processed by job-workers, were returned to the Appellant. It appears to Revenue that there were always shortages in quantity of processed inputs received back by the Appellant. The processed inputs were in lesser quantity than the quantity sent for job work. It appeared that the appellant was not reversing Cenvat credit attributable to inputs contained in the material not received back (waste and scraps). Accordingly, five (5) Show-Cause Notices were issued covering the period from April, 2011 to March, 2013. It was alleged that the assessee had never disclosed the exact quantum of goods, which were short received by them after job work as well as they did not reverse any such amount. Show-cause Notice further observed that a part of the goods sent for job work by the Assessee under Rule 4(5)(a) of Cenvat Credit Rules, 2004, were not returned even after expiry of 180 days. The five Show-cause Notices have been tabled as under :
