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2018 (7) TMI 865

grade, amounts to manufacture or otherwise? - Held that:- Circular of Board dated 10/05/2016 is a clarification on the issue of segregation of impurity, namely ,iron, steel, rubber, plastic, dust etc. from honey grade brass scrap imported, albeit in the context of Rule 3(5) of CENVAT credit rule 2004, but definitely applicable to the present case - From the above clarification, it is clear that after segregation of the mixed imported scrap, the segregated scrap, if cleared, cannot be considered as clearance of “inputs as such”. - The process of segregation of imported mixed brass scrap, into foundry and non foundry grade by weeding out the impurities so as to prepare it or make it suitable to feed into the furnace for manufacture brass ingots, and then finished goods, is a process integrally connected to the manufacture of brass articles - Tribunal in the case of Singh scrap Processor Ltd. Vs, Commissioner of C.Ex. [2002 (4) TMI 114 - CEGAT, MUMBAI] held the process of removal of impurity results into manufacture. Accordingly, the non-foundry scrap cleared in DTA on payment of excise duty, cannot be construed clearance of imported scrap ‘as such’. - Payment of duty on the e .....

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d be recoverable from the assesse-appellants; and/or(ii) the appellants had exceeded the use of laid down ratio/norms of scrap in the segregation activity and/or in the manufacture of brass articles, contrary to the norms fixed by the Norms Committee or limit prescribed under the said Notification, consequently, the utilization/clearance of excess scrap, could be said to be not used for the intended purpose and in contravention of the said Notification No. 52/2003 Cus., and accordingly applicable import duty foregone is recoverable on the said excess quantity. 3. It is noticed that the orders of the Ld. Commissioner (Appeals), on the issue of confirmation of payment of customs duty, on the issue of use/consumption of excess scrap in the segregation/manufacture of brass items are inconsistent; in the bunch of Orders passed in the year 2013, the Ld. Commissioner (Appeals) has confirmed the demand on the excess quantity of brass scrap consumed in the manufacture of finished brass articles, whereas Orders passed in 2014, the Ld. Commissioner (Appeals) had observed that since the excess quantity of scrap both at the segregation stage and also during manufacturing of brass article, clear .....

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dated 10/05/2016, issued by the Board clarifying that clearance of non-foundry scrap, generated out of the process of segregation cannot be considered as clearance of inputs as such . It is their submission that even though it is a clarification in the context of CENVAT Credit Rules, but definitely on brass items & mixed brass scrap and relevant to manufacture of brass articles, unlike the earlier circular issued in 2001, in the context of plastic articles. Thus, from the said Circular it is clear that the activity of segregation is a part of manufacturing process of brass articles, therefore, clearance of non-foundry scrap, is the result of manufacturing process . Also, hence, customs duty is not required to be paid on clearance of the segregated non-foundry scrap as the same has been cleared on payment of excise duty in DTA. The Ld. Advocates have also submitted that handling of raw material is a process of manufacture as held by the Hon ble apex court in CCE Vs. Rajastan Chemical works 1991 (55) ELT 444(SC). 8. On the issue demand of duty forgone on the use/consumption of excess quantity of imported scrap, in the activity segregation/manufacture of brass article, where the .....

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eign materials namely iron, steel, rubber, plastic, dust from honey grade brass scrap before feeding in the furnace cannot be treated as removal of inputs 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. 11. From the above clarification, it is clear that after segregation of the mixed imported scrap, the segregated scrap, if cleared, cannot be considered as clearance of inputs as such . In other words, the segregation activity is a part of manufacturing of brass articles from the imported mixed brass scrap, consequently, the demand of customs duty on the clearance of segregated non-foundry scrap in DTA, considering the same as that of imported scrap and clearance as such , is unsustainable in law. The earlier clarification issued in the year 2001, in the context of import of plastic scrap may not relevant also, it is contrary to the principle of law laid down in relation to the meaning of manufacture by the judiciary in a series of cases. .....

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te and scrap arising in the course of production, manufacture, processing or packaging of such goods) even if not exported, are allowed to be sold in Domestic Tariff Area in accordance with the Foreign Trade Policy and subject to such other limitations and conditions as may be specified in this behalf by Development Commissioner, or the Board of Approval or the Inter Ministerial Standing Committee, as the case may be, on payment of appropriate duty of excise leviable thereon under section 3 of the Central Excise Act, 1944 ( 1 of 1944) or where such finished goods (including by-products, rejects, waste and scrap) or services are cleared to the warehouse appointed or registered under notification of the Government of India in the Ministry of Finance ( Department of Revenue) No. 26/98-Central Excise (NT), dated the 15th July, 1998 or No. 46/2001-Central Excise (NT), dated the 26th June, 2001 or cleared to the warehouse authorized to carry out manufacturing process or other operation under section 65 of the Customs Act, 1962 (52 of 1962) and under the Manufacture and Other Operations in Warehouse Regulation, or cleared to the holders of certificate from Apparel Export Promotion Council .....

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