MUKAND LTD. Vs. COMMISSIONER OF C. EX.

JUDGEMENT

(1.) THE present appeal filed by the appellant, M/s. Mukand Ltd., arises from Order -in -Appeal No. PKS/80/BEL/2011, dated 26 -7 -2011 passed by the Commissioner of Central Excise (Appeals), Mumbai -III. The issue involved in this appeal is whether Cenvat credit attributable to the inputs contained in such waste and scraps, which have not been received from job -worker, is required to be reversed or not?

(2.) THE appellant, M/s. Mukand Ltd., is engaged in manufacture of excisable goods falling under Chapter 72, 73 and 84 of Central Excise Tariff Act, 1985 and was availing Cenvat credit on inputs. The appellant was sending semi -processed inputs for carrying out the process of drawing, straightening, grinding, pickling, peeling etc. to different job workers (about 15 in numbers). The semi -processed inputs after being processed for job work were returned back to M/s. Mukand Ltd. It appeared to Revenue that there were always shortages in quantity of processed inputs received back by Mukand Ltd. 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, for the period in dispute 1 -12 -2009 to 30 -9 -2010, a show -cause notice dated 24 -12 -2010 was issued on the allegation that the appellant have not received back the quantity of waste and scrap from the job -workers, which amounts to clearance of the waste and scrap without payment of duty by the job -worker. As the appellant have failed to reverse the proportionate Cenvat credit attributable on inputs contained in such waste and scrap, it appears to the Revenue that the appellant is liable to pay Cenvat Credit of Rs. 1,67,854/ - under Rule 14 of the Cenvat Credit Rules, 2004 read with Section 11 of the Central Excise Act, for violating the provisions of Rule 4(5)(a) of Cenvat Credit Rules, 2004. Further, the appellant is liable for interest and also penalty was proposed under Rule 15 of Cenvat Credit Rules read with Section 11 AC of the Act.

(3.) THE learned AR for Revenue relies on the impugned order and further relies on another SMC decision dated 19 -9 -2011 in the case of Mahindra Hinoday Industries Ltd. v. Commissioner of Central Excise, Pune -I - : 2013 (292) E.L.T. 456 (Tri -Mum). In that case the duty liability of the principal manufacturer in terms of Rule 4(6) of Cenvat Credit Rules, 2004 where credit was allowed to the manufacturer on condition that waste and scrap generated at job worker's premises would either be brought back or removed on payment of duty and held that Rule 4(6) of Cenvat Credit Rules, 2004 clearly indicates that the Revenue can impose conditions in the interest of revenue, including the manner in which duty and interest leviable is to be paid. The Commissioner had prescribed a manner in which duty liability was to be discharged by Trade Notice No. 38/2002, wherein if waste and scrap generated during the course of job -work, the job worker who is manufacturer of waste and scrap under the Central Excise Rules and the liability to pay duty is on the person, who produced or manufacture the excisable goods in terms of Rule 4 of Central Excise Rules and duty liability have to be discharged in the manner provided in Rule 8 of the said Rules. The manner of payment of duty and its liability is governed by Rules 4 and 8 of Central Excise Rules. They are not in any way altered or changed by the Cenvat Credit Rules, 2004 and accordingly in view of the condition prescribed in Rule 4 of Central Excise Rules by the Commissioner, it was held that the assessee as the principal manufacturer is liable to pay the duty on the scrap generated at the job worker's end not brought back to its premises. Having considered the rival contention, I hold that waste and scrap are not manufactured goods whether they are generated at -the premises of the principal manufacturer or at the premises of job -worker and accordingly, 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, there non -return from the job worker's premises under the Central Excise Rules, 2002 read with Cenvat Credit Rules, 2002/2004. Accordingly, I set aside the impugned order and allow the appeal in favour of the appellant with consequential benefit, if any, in accordance with law.