Clearance of segregated foreign materials from brass scrap before feeding in the furnace - not removal of 'inputs as such' - CBEC
REPRESENTATIONS have been received from the members of the trade involved in manufacture of brass products, regarding applicability of provisions relating to clearance of segregated foreign materials as "inputs as such" from imported honey grade brass scrap. The imported scrap mainly contains brass metal but it also contains impurities like iron, steel, rubber, plastic, dust etc. which is integrally attached to the main material/ brass scrap. Before feeding resultant brass scrap in the furnace during the manufacturing process, the foreign materials (impurities) attached to the honey grade brass scrap is segregated manually and then such sorted material is issued for further process like breaking, cutting etc. wherein big pieces of scrap are converted into small pieces so that the same can be fed into the furnace. Ultimately the brass scrap is fed into furnace where brass melts but materials like steel, iron etc. do not as they have higher melting point. Molten brass is poured for manufacturing whereas foundry waste of iron, steel, slag is cleared and sold separately. Such foundry waste is quite clearly process waste.
However, there is another category of waste viz. foreign materials segregated initially and not fed in furnace.
The issue is when such segregated foreign material is cleared by the brass manufacturers, can it be treated as clearance of "inputs as such" and accordingly are the manufacturers required to pay an amount equal to the credit availed in respect of such inputs in terms of Rule 3(5) of CENVAT Credit Rules, 2004?
Board clarifies that the clearance of segregated foreign materials namely iron, steel, rubber, plastic, dust etc. 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, shall be cleared on payment of Central Excise duty on transaction value as per its appropriate classification and rate of duty determined on merits.
Can the Board advise the assessees and officers on the appropriate classification of foreign material viz. "dust etc." so that the assessee can clear the same on payment of duty, if any?
CBEC Circular No. 1029/17/2016-CX., Dated: May 10, 2016