a.,
F. No. V.74/15-332/Adj/2013-14
M/s. Rapid Products, Jamnagar.
010 No.61 to 63/ADC/PV/2016
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OFFICE OF THE PRINCIPAL COMMISSIONER,
CENTRAL EXCISE AND SERVICE TAX
CENTRAL EXCISE I3HAVAN, RACE COURSE RING ROAD, RAJKOT
F. NO.: V.74/15-332/Adj./2013-14
By RPAD/HAND DELIVERY
-360001.
3=kw 3rrt2T r.
14.10.2016
ORDER IN ORIGINAL
NO. 61 to 63/ADC/PV/201.6-1
3Trt ---dcr
i1
-:
14.10.2016
Shri Pramod A. Vasave,
Additional Commissioner,
Central Excise & Service Tax, Rajkot.
Passed by
M/s. Rapid Products,
Plot No. 3869 to 3871, GIDC, Phase-III,
Y Road, Dared, Jamna • ar -361 004
In the matter of
V.74/AR-III/Div- JMN/ ADC/9
4/2014-15 dtd 19-08-2014
V.74(4)46
/Demand/2015-16, dated 14-10-2015
V.74
(4)05/Demand/ 2016-17, dated 11-C14-2016
1. TT-6- ;Tf4f4ft
M1r TrzfraT
41- e I
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This copy of order is granted free
of charges to the person to whom it is issued.
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Any person deeming himself aggrieved by this order may appeal against this order to the Commissioner(Appeal-111)
of Central Excise, Central Excise Bhavan, 2nd Floor, Race course Ring Road, Rajkot -360001.An appeal against this
order shall lie before the Commissioner (Appeal) on payment of 7.5% of the duty demanded where duty or duty
and penalty are in dispute or penalty, are in dispute or penalty, where penalty alone is in dispute.
3. 3-11fiR tO1
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The Appeal should be filed in form EA-1 and
it shall be signed by the person as specified in rule 3 (2) of the Central
Excise (Appeals) Rules, 2001.
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The appeal
should be filed within sixty days from the date of receipt of this order. (Section 35(1) of the Central
Excise
Act, 1944).
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The appeal should be accompanied by
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(a)
Copy of this order which should bear court fee stamp as prescribed under schedule 1 of Article 6 of the
Court fee stamp Act, 1870, as under:
(i)
•
TW3:1- zir zlr--z
. 14
25 -11-tr
c ,,1-1
5ffrit zir 50
if the amount or value of subject matter is Rs. fifty or less, then 25 paisa;
(ii)
tai IT). I 50,t,Lie)
5:41a
al* 50
(ii)
if such amount exceed Rs. 50 than, 50 paisa.
(b) 3P:fro- *.r LTW 1Q 4 40. tth
- 2.F71-41- WPM 50
(b)
A Copy of the appeal should also bear a court fee of RS.2.50
6. trOT
s 3frit W
1PT f CITTIDTc.
rtf)), artita W
TW VritCT
6. Proof of payment of duty penalty etc. should also be attached to the original
form of appeal.
Notes:[These notes are for broad general guidance only. The original text of the Central Excise Act, 1944 and the
Rules framed there under may be referred to before taking any action in terms of these Notes.)
Page 1 of 11
_ • .•-. v.,.1/ 10-332/Adj/2013-14
M/s. Rapid Products, Jamnagar.
010 No.61 to 63/ADC/PV/2016
BRIEF FACTS OF THE CASE :
The issue involved in the following 3 Show
common and hence all these SCNs are being decided Cause Notices (SCNs), is
by this common Order.
V. 74 /AR-III/DivJMN/ ADC/94/201415 dated 19-08-2014
V. 74(4)46/Demand/
20 15-16, dated 1410-2015
2.
Briefly stated the facts of the case are that M/s
3869 to 3871, GID
.Rapid Products, Plot No.
(hn
ereiafter referred
Phase-III, Y Road, Dared, Jamnagar -361 004
f
tC,
o as "the Noticee")
excisable products
are engaged in the
falling und
manufacture of
under
Chapter
heading
8481,
7415,
7403
of the First
Schedule to the Central Excise Tariff Act, 1985 and
Excise assessee vide
are registered as a Central
Registration No. AAIFR2674PXM001. They are availing
facility of CENVAT credit under CENVAT Credit Rules, 2004
referred to as "CENVAT Rules").
(hereinafter
3.
It was noticed that the Noticee were importing their main input viz. Mixed
Brass scrap for manufacturing of their finished products i.e. Brass Extruded
Rods/Bars, Brass Section, etc.. They were paying Customs duties at the time of
import and availing credit of Countervailing Duty (CVD) under CENVAT Credit
Rules, 2004, on the entire quantity of Brass Scrap received as input.
4.
It appeared that during the course of manufacturing, the Noticee carry
out segregation of scrap by manual process initially and after sorting the metal
scrap, only foundry scrap is transferred to furnace to produce final products.
They clear various impurities into DTA after payment of Central Excise duty by
classifying the same as "M.S. Scrap". The waste & scrap of Iron & Steel/M.S.
scrap /various impurities, cleared by them is nothing but
re moval/clearance of
a part of the imported inputs i.e. Brass Scra p, which has
not undergone
through any manufacturing process in terms of the definition of " anufacture
given under Section 2(I) of the Central Excise Act, 1944
m"
to as "the Act"),
(hereinafter referred
which reads as under :
d
"(f) "manufacture"
includes any process, (i)
incident& or ancillary to the completion of a manufactured product;
(ii)
which is specified in relation to any goods in the Section or Chapter
notes of the First Schedule to the Central Excise Tariff Act, 1985 (5 of
1986) as amounting to manufacture; or
(iii) which, in relation to the goods specified in the Third Schedule,
involves packing
labelling
or re- or repacking of such goods in a unit container or
labelling of containers including the declaration or
alteration of retail sale price on it or adoption of any other treatment
on the goods to render the product marketable to the consumer,
Page 2 of 11
F. No. V.74/15-332/Adj/2013-14
M/s. Rapid Products, Jamnagar.
010 No.61 to 63/ADC/PV/2016
and the word "manufacturer" shall be construed accordingly and shall
include not only a person who employs hired labour in the production or
manufacture of excisable goods, but also any
person who engages in their
production or manufacture on his own account;"
5.
In view of above definition of manufacture, it appeared that such
scrap/impurities, which are not generated from the manufacturing operations
but separated during segregation of imported brass scrap alongwith other
impurities and if such scrap is removed/cleared "as such", the Noticee was
required to pay the proportionate amount of the CENVAT credit availed on the
imported brass scrap, in terms of Rule 3(5) of the CENVAT Rules. However, the
Noticee has not followed the aforesaid provisions and cleared such scra on
p
payment of Central Excise duty on transaction value.
6.
In this regard, the Board has issued a Circular No.6
2 / 2 001-Cus dated 1211-2001, from F. N o.305/ 39
/2
001-FTT, the relevant portion of which is
reproduced as under :
"Subject : Valuation of Plastic Waste 86 Scrap by
EOU/EPZ/SEZ Units Sold/ Cleared to other
EOU/EPZ/SEZ Units or to the DTA Units - Reg.
directed to invite your attention to Board's instructions (Issued from
F. No.I am
268/
35/ 9
2-Cx. 8), dated 17-8-1994 and 28-8-1997 (issued from F. No.
268/ 45 / 9
7-Cx. 8) regarding valuation of goods manufactured and cleared into
DTA by 100% EOU. It was clarified that in case of DTA sales the invoice price
can be accepted for purposes of assessment if the same is in the nature of
transaction value under the Customs Valuation Rules, 1988. It was also
clarified that the above instructions would be applicable to assessment of
waste & scrap generated (in the unit) and cleared into DTA by EOUs/EPZ
units. In this connection, a doubt has been raised regarding valuation of
certain variety of plastic waste & scrap, which is not generated out of the
manufacturing operations but emerges during segregation of such plastic
waste & scrap after import.
2. The matter has been examined by the Board. It is seen that plastic waste
& scrap reprocessors operating under EOU/EPZ/SEZ Scheme, who are
producing plastic agglomerates out of imported plastic waste & scrap, use only
a portion of such plastic waste & scrap for manufacture of plastic
agglomerates. The balance quantity is sought to be cleared in DTA or to other
EOU/EPZ/SEZ units. Paragraph 9.18 of the Exim Policy provides that in case
an EOU/EPZ/ETHP/STP unit is unable, for valid reasons, to utilise the goods,
imported or procured from DTA, it may dispose of them in DTA on payment of
applicable duties. As per the notifications issued by the Government in these
cases the value taken for Customs purposes is the CIF value of materials at
the time of import. It is seen that waste and
scrap sought to be sold/cleared to
other DTA units or to other EOU/EPZ/SEZ units arises due to segregation of
imported materials at a stage prior to their being used in the production
process and therefore the same cannot be treated as plastic waste and scrap
generated out of the production process. Therefore, for the purpose of charging
duty, such plastic waste and scrap will have to be treated as unutilised
material and valuation of such waste & scrap will have to be done on the basis
of their CIF value at the time of import. Even for inter-unit or inter-zone
transfer of such segregated un-utilised plastic waste & scrap, the goods will
have to be assessed on the basis of CIF value of imported scrap."
7.
Sub-rule (5) of Rule 3 of CENVAT Rules reads as under :"(5) When inputs or capital goods, on which CENVAT credit has be en
en
taken, are removed as such from the facto
premises fthe prover
of output service, the manufacturer of the final products o or
provider
id of
output service, as the case may be, shall pay an amount equal to the
Page 3 of 11
_
zu13-14
M/s. Rapid Products, Jaronagar.
0I0 No.61 to 63/ADC/PV/2016
credit availed in respect of such inputs or capital good
removal shall be made under the cover of an invoice referreds and such
to in rule 9
Provided ..........
Provided
further that ........ "
8.
In view of the above, it appeared that the waste arid s
crap of Iron &
Steel/M.S. Scrap/various impurities cleared
by the
Part-removal/clearance of the imported goods i.e. BraNoticee is nothing but a
ss Scrap, which has not
undergone any manufacturing proces
s in terms of the definition of the
"manufacture"
given under
Section 2(1) of the Act. Thus, in view of the above
provisions, such scrap/impurities which are not generated from the
manufacturing operations but separated durin seg regat
ion of imported Brass
Scrap alongwith other impurities and hence, such scrap
removed/cleared after paying the proportionate amountwa
ofsrequired to be
availed in terms of Rule 3(5) of CENVAT Rules.
CENVAT credit
edit
9.
It further appeared that the Noticee has availed CENVAT c
consignment of the Brass re
redit on entire
g impurities, and therefore,
Scrap
includin
proportionate CENVAT credit in spect of such
scrap, which the
part quantity of the imported
y had removed/cleared as such, is required to be
paid/reversed in terms of Rule 3(5) of CENVAT Credit Rules, as calculated in
Annexure-A attached to the SCN dated
1903-2014, for the period from April
2009 to September 2013, involving proportionate Cenvat credit amounting to
Rs.14,47,638/- which appeared liable to be
demanded/recovered from the
Noticee
along
with
appropriate
interest,
in
terms
of Rule 3(5) rea
ibid.
d with Rule 14
10.
Whereas, it further appeared that the Noticee has collected Central
Excise duty from their customers on clearances of such M.S. Scrap/other
impurities on the basis of transaction value in terms of Section 4 of the Act and
deposited the same with the Central Government within the stipulated time
and which was not required to be collected and paid to the exchequer and
hence in terms of the provisions of Section 11D of the Act, the amount thus
paid cannot be appropriated against the aforesaid amount.
11.
It further appeared that the Noticee, at no point of time
the aforesaid material facts to the de
,had disclosed
partment in
particulars
any manner and supplied the
such as quantity/assessable value etc. shown in the Bills of
Entry/Input Scrap invoices and this fact came to the knowledge of the
department only when the Noticee supplied the details vide th
21-05-2013, 2 7-12-2013 and
eir letters dated
17- 04-2014, in repl
y to the letter
III/ Misc-Info/Audit/ 12-13 dated
No:
11-02-20103 86 dated 11-12-2013 F. and
ARF. No: AR-III/Audit/Rapid/2013-2014 dated
letter
1 1-04-2014 of the Range
Superintendent. Therefore, it appeared that the Noticee had deliberately
suppressed the material facts from the department with an intent to evade
payment of duty and hence the amount of Rs.
14,47,638/- is required to be
demanded/recovered from them by invoking extended period under Section
11A(4)2004.
of the Act read with the provisions of Rule 14 of the CENVAT credit
Rules,
•
12.
Consequently,
a Show Cause Notice F. No. V.74/AR-III/Div- JMN/
ADC/94/2014-15
dated
1908-2014, was issued to M/s. Rapid Products,
Page 4 of li
F. No. V.74/15-332/Adj/2013-14
M/s. Rapid Products, Jatnnagar.
010 No.61 to 63/ADC/PV/2016
Jamnagar
, bycause,
the Additional
of Central Excise, Rajkot, asking
them
to show
as to whyCommissioner
:
(1)
the amount of Rs.14,47,6
38/-,payable
by them under Rule 3(5) of the
CENVAT Credit Rules, 2004, should not be recovered from them under
Rule
14 of the
CENVAT
Credit Rules, 2004 read with Section 11A(4) of
the
Central
Excise
Act, 1944;
(ii)
interest at the appropriate rate, should not be charged and
from them in respect of the amount demanded at Si. No
recovered
.(i)
above,
under
Rule 14Excise
of CENVAT
Credit Rules, 2004 read with Section 11AA of
the
Central
Act, 1944;
(iii)
penalty should not be imposed upon them under Rule 15 of the
Credit Rules, 2004 read with Section 11AC of the Central Excise Act,
1944.
13.
Subsequently, another 2 Show Cause Notices, as detailed in T
able below,
were issued to them on the same issue, for the subsequent perio
by the
Deputy Commissioner, Central Excise, Jamnagar, demanding am
g amount equal to
the CENVAT credit availed by them on the M.S.
cleared by
them "as such" and which were part of the impo
rted Mixed
alongwith interest and proposing imposition of penalty on them. Brass Scrap,
V.74(4) 46 /Demand/
2 015-16, dated 14-102015
12
14.
V.74(4)05/ Demand/
2016-17, dated 11-042016
Deputy
Commissioner,
Central Excise,
Jainna ar.
The SCNs dated 14-10-2015 and
1
1-04-2016 have been issued by/made
answerable to the Deputy Commissioner, Central Excise, Jamnagar. However,
in view
of the instructions issued by the Board, vide Circular No.362/78/97CX.,
dated
0912-1997, read with Circular No.752/68/2003-CX., dated 01-102003, wherein it has been clarified that where simultaneously different cases of
the same noticee involving the same issue are due to be adjudicated in a
Commissionerate, all such cases will be adjudicated by an officer competent to
decide the case where duty involved is of highest amount, and therefore the
aforesaid SCNs dated 14-10-2015 and 11-04-2016 , are also being taken up
for adjudication through this common order.
REPLY WRITTEN SUBMISSIONS :
15.
M/s. Rapid
Jamnagar , have filed their written submissions to
the S.C.N.
datedProducts,
1908-2014,
vide their
have, inter alia, submitted
as under
:- letter dated 11-09-2014, wherein they
(i)
that the provisions of Rule 3(5) of CENVAT Rules provide that th
enon
he
which CENVAT credit has been availed are removed 'as such' 'it'
then
the
manufacturer shall pay an amount equal to the credit availed on such 'in
' put the
(ii
);
(ii)
that in the present case, they have availed CENVAT credit on 'input namely
Scrap (falling under CETSH 7404 0022) and have cleared/removed
Page 5 of 11
jizohi-14
M/s. Rapid Products, Jarnnagar.
0I0 No.61 to 63/ADC/PV/2016
resultant Iron/M.S. scrap (falling under CETSH 7204 4900), which
generated during the manufacturing process and therefore, the same can were
treated as 'removal as such' and hence the impugned notice, invoki not be
king the
provisions of Rule 3(5) of the CENVAT Rules, is untenable in law;
(iii) that Brass Scrap which was originally brought as Input', has not been
cleared 'as such' from factory
Iron/MS scra
(as a matter of fact what was cleared was
p')
and
therefore,
invoking
provisions of Rule 3(5) of CENVAT
Rules in the present
matter is not tenable in law;
(iv) that it is not the case of the department that 'input', nam
ely Brass Scrap,
originally brought in the factory have not undergone any process
at all and that
they have removed Brass Scrap under the guise of Iron/MS scrap';
(v) that it is settled legal position that 'waste and scrap' (iron/MS
case) arising in the course of processing of 'input' (Brass Scrapscrap
i thi in this
n
s case),
has to be cleared on payment of duties as if such '
wast e and scrap' is
manufactured in the factory and such `waste
and scrap ' are to be treated as
`final products';
(vi) that provisions of Rule 3(5) of CENVAT Rules apply only to 'input' or
`capital goods' cleared 'as such'; that there is also a provision for capital goods
cleared as 'waste and scrap' but there is no such provision under the CENVAT
Rules to deal with `inputs' becoming waste and scrap in the course of
manufacturing process; that in the absence
credit in such cases, the im
of any legal requirement to reverse
pugned
notice,
invoking
provisions of Rule 3(5) of
CENVAT Rules is untenable in
law.
decisions of High Court/Tribunal, in
su They have relied upon the following
pport of their contentions
(i)
CCE, Bangalore-I Vs Geltec Ltd. - 20 12
(ii) CCE, Bhopal Vs
(28 1
, Crompton Greaves Ltd)
ELT 170 (Kar.);
(Tri.Del);
. - 2010 (261) ELT 939
(iii)
Madras Cement Ltd. Vs. CCE,
Tri
Chennai);
2010 (259) ELT 137 (Tri.
(iv)
CCE, Lucknow Vs. Roll Tubes Ltd.(v) CCE, Patns Vs.
2007 (215) ELT 426 (Tri. Del);
(Tri.Kol.).
Tel Fab Indus (P) Ltd.- 2001 (136) ELT 1178
(vii) that the impugned SCN has been issued on the allegation that the so
called Iron./MS scrap' were generated during the 'process of segregation' of
imported brass scrap, which is not a process of manufacture and hence at the
time of clearance of such Iron/MS scrap', the same should have been treated
as 'input removed as such'; that the impugned SCN, in para 3, itself accepts
that 'segregation' of scrap is absolutely required before transferring virgin metal
into foundry/furnace and therefore, the allegation that such iron/MS scrap
were not generated during the manufacturing process is untenable in law since
`segregation process', admittedly, is part and parcel of overall 'manufacturing
process;
(viii) that the SCN has been issued on a wrong notion/interretation that till
the time 'inputs' are converted into 'final products', whatever 'wastages' are
generated in between, during the said conversion process, and cleared
thereafter are to be treated as 'removal as such';
(ix) that such interpretation of the provisions of CENVAT R ules
law since the provisions nowhere requires that full quantity ofis untenable in
'inputs' should
Page 6 of 11
P. No. V.74/15-332/Adj/2013-14
M/s. Rapid Products, Jainnagar.
010 No.61 to 63/ADC/PV/2016
be contained in the 'final
products'; that the relevant provisions only require
that the 'input' should be received in the factory of manufacture and the same
y the manufacturer
of the final product which has not been
disputed in the present
case;
(x)
that the SCN has been issued on the wrong notion that the 'segregation of
goods' is notas
a manufacturing process in terms of the definition of
`manufacture'
given under Section 2
(1) of the Central Excise Act, 1944;
(xi)
that Section 2(f) ibid, nowhere says that 'segregation of goods' is not a
`manufacturing process', on the contrary, it provides that 'manufacture
includes any process incidental or ancillary to the completion of a
also;
manufactured product' and the same ought to include 'segregation process'
(iii)
that it is settled law that if a particular operation/process (alleged
segregation in the present case) renders a commodity or article (13rass Scrap
with impurities in the present case) fit for further use, for which it is otherwise
not fit, than that particular operation/process will fall within the eaning of
the word 'manufacture' and therefore the main allegation of themmpugned
notice that imported raw material have not gone into any manufacturing
operations is not correct. They relied upon following decisions in this regard
(i) Commr. of Income T
2010
ax-V New Delhi Vs. Oracle Software India Ltd(250) ELT 161 (S.C.).;
(xiii) that in a similar issue, the Hon'ble Supreme C curt, has held that set off
(presently CENVAT credit) is not deniable (recoverabl
exempted by-products, waste mater
e) if non excisable or fully
ials or residue (iron/MS scrap in the
present case, which was removed on payment of appropriate Central Excise
duty), emerged at intermediate stage unless excess use of 'input' (brass scrap
in the present case) is proved, which is not the case of the department. They
have relied upon the following decision in support of this contention
(1) Swadeshi Polytex Ltd. Vs. CCE - 1989 (44) ELT 794 (S.C.).
(xiv)
that department has all aloe
scrap' is generated Burin
g been accepting the fact that `iron/MS
g the manufacturing process and therefore, now
department can not turn a round a nd say that removal of such waste and scrap
is to be treated as 'removal of input as s uch';
(xv)
that there was no recovery mechanism for recovery of amounts payable
under Rule 3(5) of CENVAT Rules till 28-02-2013 and hence the SCN is
without authority of law to that extent;
(xvi)
that the generation of (iron/MS scrap' was always known to the
department since the same were removed on payment of Central Excise duty
and its production and clearances were duly reflected in the relevant records
and in periodical returns; that they are engaged in manufacturing since long
and from time to time departmental officers have audited their statutory and
excise records however, audit had neither raised any objection, whatsoever,
about clearances of such iron/MS scrapnor had objected about quantum of
duty payable thereon therefore, the SCN is time barred;
Page 7 of 11
-r/ .o-od2/Adj/2013-14
M/s. Rapid Products, Jarnnagar.
010 No.61 to 63/ADC/PV/2016
(XVii)
that proposal for recovery of interest and imposition of penalties under
various
provisions
of law is unwarranted and unsustainable in law, both on
merits and
limitation.
15.1 M/s. Rapid Products, Jamnaar
g
submissions to the S.
C.Ns. dated 14 , have subsequently filed their written
written submissions dated
and 11-04-2016, vide their
21- 11-2015 -10-2015
and 26-05-2016
they have inter alia, submitted similar grounds as
respectively, in which
reply dated 1109-2014, as stated in para 15 above. mentioned in their earlier
DISCUSSION AND FINDINGS
16.
I have carefully gone through the evidence available on record including
the SCNs, as mentioned above, as well as the replies dated 11-09-2014, 21-11SCNs.
2015 and 26-05-2016 filed by the Noticee, with reference to the respective
16.1
non
I find that the issue involved in these SCNs is regarding clearance of
g
-foundry
scrap, obtained b y seregation
of Mixed Brass Scra p, by the
Noticee,
on
payment of transaction value b
y classifyi
Rubber Scrap, Plastic scrap etc..
ng the same as M.S. scrap,
amount e
The
SCNs
propose
demand and recovery of
qual to CENVAT credit availed by the
Scrap received by them and
Noticee on the Mixed Brass
them.
on which CENVAT Credit has been availed by
16.2
It is proposed in the SCNs that segregation of Mixed Brass Scrap is not
a manufacturing process and thus the non-foundry scrap obtained by
segregation is not a finished product or by-product. Thus, since no
manufacturing
their
"input as activity
such" was involved, the non-foundry scrap was nothing, but
and in
suchto
case,
required to pay an amount
equal
the on
CEclearance thereof, the Noticee were
under Rule 3(5) of the CENVAT Credit Rules NVAT credit availed on the inputs,
, 2004.
16.3
The SCNs have relied upon the clarification i
Circular No.62/2001-Cus dated 12-11-2001, issued fr ssued by the Board vide
FTT, which is reproduced as under :
om F.No.305/39/2001"Subject: Valuation of Plastic
Waste & Scrap by
EOU/EPZ/SEZ
Units
Sold/
Cleared
EOU EPZ SEZ
Units or to the DTA Units other
- Re
F. No.I am
to invite your attention to Board's instructions (Issued from
268directed
/35/ 92-Cx.
8), dated 17268 / 45 / 9
8-1994 and 28-8-1997 (issued from F. No.
7Cx. 8) regarding valuation of goods manufactured and cleared into
DTA by 100% EOU. It was clarified that in case of DTA sales the invoice price
can be accepted for purposes of assessment if the same is in the nature of
transaction value under the Customs Valuation Rules, 1988. It was also
clarified that the above instructions would be applicable to assessment of
waste & scrap generated (in the unit) and cleared into DTA by EOUs/EPZ
units. In this connection, a doubt has been raised regarding valuation of
certain variety of plastic waste & scrap, which is not generated out of the
manufacturing
operations
waste & scrap after
import. but emerges during segregation of such plastic
2. The matter has been examined b
scrap
y the Board. It is seen that plastic waste &
reprocessors operating under EOU/EPZ/SEZ Scheme, who are
producing plastic agglomerates out of imported plastic was te & scrap, use only
Page 8 of 11
F. No. V.74/15-332/Adj/2013-14
M/s. Rapid Products, Jamnagar.
0I0 No.61 to 63/ADC/PV/2016
a portion of sucl-I plastic waste &
scrap for manufacture of plastic
agglomerates. The b
mce
quantity
is
sought
to be cleared in DTA or to other
EOU/EPZ/SEZ unit
.
Paragraph
9.18
of
the
Exim
Policy provides that in case
an EOU/EPZ/ETHP
,
imported or Procure STP unit is unable, for valid reasons, to utilise the goods,
applicable duties. A from DTA, it may dispose of them in DTA on payment of
cases the value talc per the notifications issued by the Government in these
the time of import. I n for Customs purposes is the CIF value of materials at
other DTA units or is seen that waste and scrap sought to be sold/cleared to
imported materials o other EOU/EPZ/SEZ units arises due to segregation of
process and therefo at a stage prior to their being used in the production
generated out of t e the same cannot be treated as plastic waste and scrap
e production process.
Therefore, for the purpose of
charging duty, su
h
plastic
waste
and
scrap
will have to be treated as
unutilised materia
done on the basis and valuation of such waste & scrap will have to be
unit or inter-zone f their CIF value at the time of import. Even for interscrap, the goods ransfer of such segregated un-utilised plastic waste &
ill have to be assessed on the basis of CIF value of
imported scrap."
16.4
However, on
p
clarification has ,been ain reading of the above Circular, I find that the said
Waste & Scrap by E ssued by the Board in respect of valuation of Plastic
EOU/EPZ/SEZ Units o U/EPZ/SEZ Units, which are sold/cleared to other
neither an EOU/EPZ/ to the DTA Units. However, the Noticee in this case, is
& Scrap. Therefore, th EZ, nor are they engaged in clearance of Plastic Waste
said clarification does not cover the issue involved in
the subject SCNs.
16.5
I further find
the issue involved in the subject SCNs has been
recently clarified by th that
Board, vide Circular No. 1029 / 17 / 2
016-CX, dated 1005-2016, issued from .No.267 / 33 / 2
014-CX.8, wherein it has been clarified
that the clearance 'of s
gregated
materials
namely iron, steel, rubber, plastic,
dust etc. from honey g
treated as removal of ade brass scrap before feeding in the furnace cannot be
CENVAT Credit Rules, inputs as such", as envisaged under Rule 3 (5) of the
2004. For ease of reference, the relevant paras of the
said Circular is reprod ced
here :
"Represen
trade involved in ations have been received from the members of the
provisions relating anufacture of brass products, regarding applicability of
as such" from imp to clearance of segregated foreign materials as "inputs
mainly contains br rted honey grade brass scrap. The said imported scrap
ss metal but it also contains
impurities like iron, steel,
rubber, plastic,
ust etc. which is integrally
attached to the main
material/brass scr
:p.
Before
feeding
resultant
brass
scrap in the furnace
during the manufa
turing
process,
the
said
materials
(impurities)
attached
to the honey grad
brass
scrap
is
segregated
manually
and
then
such
sorted material is
wherein big piece issued for further process like breaking, cutting etc.
same can be fed i of scrap are converted into small pieces so that the
furnace where bra to the furnace. Ultimately the brass scrap is fed into
have higher melti s melts but materials like steel, iron etc. do not as they
g point. Molten brass is poured for manufacturing
whereas foundry
aste
of iron, steel, slag is cleared and sold separately.
Such foundry wast
is quite clearly process waste.
2.
However, t ere is
segregated initiall and another category of waste viz. foreign materials
segregated foreign materi not fed in furnace. The issue is when such
be treated as cle t rance al is cleared by the brass manufacturers, can it
of "inputs as such" and accordingly are the
Page 9 of 11
v.tc+ / 1b -332
/Adj/2013-14
M/s. Rapid Products, Jarnnagar.
010 No.61 to 63/ADC/PV/2016
manufacturers
in respect of such
required to pay an amount equal to the credit availed
Rules, 2004.
inputs in terms of Rule 3(5) of CENVAT Credit
3.
The issue has been examined. Segregation from honey grade brass
scrap in order to weed out other foreign materials before the process of
melting
in the furnace is an essential process relating to manufacture of
brass
articles.
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-a-vis brass scrap. Value per
unit and classification of the segregated foreign material is also
different from that of imported 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. 62/2001-Cus dated 12.11.2001 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
i
treated as removal of "inputs as such"
as envisage furnace cannot be
d under
Rule 3 (5)
of CENVAT Credit Rules, 2004. The se re ated forei
n material
in
such situation as has been ex lained above shall be cleared on
a ment of Central Excise dut on transaction
value as er
ro riate classification and rate of dut determined
on merits." its
Em hasis su
lied .
16.6
I find that the issue involved in the subject SCNs is squarely covered by
the clarification issued by the Board vide above Circular dated
therefore hold that the non-fou
10-05-2016. I
n
dry Materials, emerging during the process of
segregation have to be treated as process waste and the same cannot be
treated as removal of inputs as such. The segregated non-foundry materials
have different character and use vis-a-vis brass scrap. As clarified in the above
circular, the value per unit and classification of the segregated foreign
materials is different from the imported brass scrap. Accordingly, clearance of
non-foundry materials by the Noticee cannot be treated as
inputs as such".
"clearance of
It has been further clarified by the Board, in the said Circular
that Circular No.62/2001-Cus, dated 12-11-2001, (which has been relied upon
while issuing the impugned SCNs) does not apply to the issue at hand, as the
facts at hand are different.
16.7
I,
therefore, hold that the segregated non-foundry materials such as
iron, steel, rubber, plastic, dust etc., segregated from hone
(on which the assesses has
y grade brass scrap
availed CENVAT
furnace, cannot be treated as removal of "inputscredit), before feeding in the
as such", as
Rule 3 (5) of the CENVAT Credit Rules, 2004 and hence the de envisaged under
of CENVAT credit, issued vide i
demand of recovery
hence liable to be dropped.
mpugned SCNs, is not legally sustainable &
Page 10 of 11
P. No. V.74/15-332/Adj/2013-14
M/s. Rapid Products, Jamnagar.
010 No.61 to 63/ADC/PV/2016
17.
Accordingly, I, pass the following order:
ORDER
17.1
I drop the proceedings initiated vide following S.C.Ns. issued to the
Noticee i.e. M/s. Rapid Products, Plot No. 3869 to 3871, GIDC, Phase-III, Y
Road, Dared, Jamnagar -361 004.
Si.
No.
S.C.N. No. and date
Period covered in
S.C.N.
(1)
1
(3)
V.74/AR-III/Div- JMN/ ADC/94/2014-15
dated 19-08-2014
2
V.74(4)46/Demand/ 2015-16,
dated 14-10-20'15
3
V.74(4)05/Demand/ 2016-17,
dated 11-04-2016
(4)
August, 2009
to
March, 2014
October, 2014
to
March, 2015
April, 2015
to
September, 2015
Amount of
CENVAT credit
demanded
(Rs.)
(5)
14,47,638/2,62,976/1,92,816/-
(PRAMOD A. VASAVE)
ADDITIONAL COMMISSIONER.
F.No.V.74/ 15-332/Adj./2013-14
Dated:14.10.2016
By Speed Post
M/s. Rapid Products,
Plot No. 3869 to 3871, GIDC,
Phase-III, Y Road, Dared
Jamnagar -361 004
Copy To:
1. The Principal Commissioner, Central Excise, Rajkot
2. The Additional Commissioner (RRA), Central Excise, Rajkot.
3. The Commissioner of Central Excise, Audit - III, Rajkot with reference to
FAR No: B-610/2012-2013.
4. The Deputy Commissioner, Central Excise Division-Jamnagar.
5. The Superintendent, A.R.-III, Central Excise Division-Jamnagar.
6. F. No: V.74(4)46/Demand/2015-16
7. F. No: V.74(4)05/ Demand/2016-17
N/8( Guard File.
Page 11 of 11
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