Ad-Free CAclubindia and Daily Updates on your mobile. Subscribe Now!

Scrap used for captive consumption - excise duty?

Deena.Vanan (Grad. CWA, ACA, CS(F)) (120 Points)

23 September 2012

Hi, One of my client has used the scrap generated from his manufacturing activities as a input for construction of an asset (captive consumption). Whehter they should pay excise duty on the same?

If Yes, After paying the ED whether they can claim CENVAT credit ( @ 50% in the current year and balance in the next year) on the duty paid for captive consumption? Pls calrify me..

P.S The Finished goods manufactured by the assesse is liable to Excise duty.

Reply
Follow
Share

8 Replies

CA.Ankur Khandelwal (Owner) (281 Points)
Replied 23 September 2012

Excise notification 67/95 not applicable on same.

you have to pay duty on the same as scrap is not intermediate good

1 Like

Upgrade to CAclubindia Pro. Subscribe Now!

Aman Aggarwal (Audit & Finance Manager) (62 Points)
Replied 06 October 2012

I respectfully disagree with CA Ankur Sir. In Khandelwal Metal & Engineering Works V/s UOI , The apex court held that process waste & scrap was a commercially distinct & indentifiable product which has commercial value. It is chargeable to duty provided it is covered in tariff schedule

Intermediate product itself is one which is complete, identifiable & capable of being sold in the market coming in to existence during the mfg process at intermediate stage.

So i believe you can take the benefit of notification 67/95 dated 16.03.95.

Please correct me if i am wrong on this technicality

1 Like

U S Sharma (glidor@gmail.com) (21056 Points)
Replied 06 October 2012

1st of all you have to understand what is scrap, scrap is the bye product, which can not be further processed in the factory of manufacture, and is liable to be sold after paying duty on transaction value, or to be destryed under duty remission.

as per you, the scrap is getting used captively, then how you can prove that it is scrap? as scrap means not to be used further............................and if it is to be used further then you have to pay duty on 110% of value of inputs contained in the intermediate goods :)

now coming next, you told "scrap used for construction of an asset", in plain words i am doubtful that such asset is not covered by CCR 2004 under capital goods, as i assume that such scrap is used under basement of any building or piller, not in capital machinery or plant, and goods used in errection or commissioning / building and shed is not to be confirmed as capital goods.

now coming to consequences ............say you have been able to make a graph and claimed the captive consumption, which is doubtful to be allowed under audit, and will get reversed or not is later question.

BUT, you will be barred to declare the value of scrap generated in future at lower price , and it will be fixed @ 110% of input value as you have already shown in your records. so your scraps will be sold at higher price than inputs :) or in plain language, you have to pay duty on 110% of input value at the time of clearance of scrap .

choice is yours

satya (Executive Excise) (1839 Points)
Replied 19 April 2013

Hi, dina.vanan,

Please follow U.S.SHARMA ji inputs,

he explained clearely.

Thanks SHRAMA JI.

satya (Executive Excise) (1839 Points)
Replied 19 April 2013

Hi, dina.vanan,

Please follow U.S.SHARMA ji inputs,

he explained clearely.

Thanks SHRAMA JI.

Upgrade to CAclubindia Pro. Subscribe Now!

Amber Jain (Article Assistant) (206 Points)
Replied 29 April 2013

Hello,

You will have liability of Excise duty on the same as it's coming within the category of consumption & it's again being reused for construction asset so liablity will arise & even there will be liability of Sales Tax also.

Thanks & regards

Amber Jain

Prabhat Kumar (Advocate & Consultant) (1912 Points)
Replied 09 May 2013

Any input or capital goods if consued captively with in the factory of production is not liable for Excise duty,provided the final product is dutiable and duty is paid.[Notification No.67/95-C.E dated 16.3.1995]