{"id":252271,"date":"2021-08-05T10:00:24","date_gmt":"2021-08-05T04:30:24","guid":{"rendered":"https:\/\/www.scconline.com\/blog\/?p=252271"},"modified":"2021-09-17T15:58:48","modified_gmt":"2021-09-17T10:28:48","slug":"central-excise-duty","status":"publish","type":"post","link":"https:\/\/www.scconline.com\/blog\/post\/2021\/08\/05\/central-excise-duty\/","title":{"rendered":"CESTAT | Does Rule 4(5)(a) of Cenvat Credit Rules, 2002 cover the return of waste and scraps and is it subject to Central Excise duty? Tribunal answers"},"content":{"rendered":"

Customs, Excise and Services Tax Appellate Tribunal (CESTAT):<\/strong> Rachna Gupta (Judicial Member) allowed an appeal which was filed aggrieved by the order-in-original asking the appellants for recovery of Central Excise Duty amounting to Rs 16,22,501 along with the appropriate interest and proportionate penalty.<\/p>\n

The appellant was engaged in the manufacture of organic compound and enzymes. During the course of audit, the Department observed that the appellant had sent 1,41,396.180 litres of chemical for job work under job work Challan for processing. They had received only 90620.290 litres of chemicals. The chemical not received by the appellant i.e. 50775.890 litres was alleged to have the value of Rs. 1,01,15,903\/- involving Central Excise duty of Rs.16,22,501\/- from their job worker. The said amount of excise duty during the period from 1-3-2003 to 31-3-2005 has accordingly been alleged to have not been paid in contravention to the provisions of Rule 4(5) of CENVAT Credit Rules, 2002.<\/p>\n

The appellant submitted that in the manufacture of organic compound into antibiotics and enzymes, the appellant has used Hexa methyl Di-Silioxane (HMDS). After the manufacture of said antibiotic, there remain a by-product namely, (Hexa-Methyl Di-Silixane) HMDSO which contains 75% of HMDS, the raw material for the appellant’s final product and about 25% Toluene. They did not have recovery plant in their factory premises to recover said 75% of HMDS from the said by-product HMDSO. Accordingly, the said product was given to the job worker with an agreement that the yield returnable product would be 90% calculated on 100% basis of HMDS in case the purity is more than 80%. However, if the purity was less than 80%, the yield returnable would be 85%. It was submitted that it is because of that difference in yield returnable that quantity of HMDS received back by the appellant from the job worker was less by about 32-36% of total quantity of HMDSO.<\/p>\n

The main issue deduced by the tribunal was that whether Rule 4(5) of CCR was applicable to the given facts and circumstances. The Tribunal perused Rule 4 (5) and explained that:<\/p>\n