Central Excise Duty on Waste and Scrap

By Vijay Kumar

IN a recent meeting of the Regional Advisory Committee of Hyderabad Central Excise Zone, a point was raised,

CBEC Instruction in F.No.96/85/2015-CX.I., Dated: December 07, 2015 has communicated minutes of the meeting of Chief Commissioners held on 28/29th October, 2015. One of the issues discussed at the said meeting was on the duty on waste and scrap. The conference decided that henceforth waste & scrap are to be treated as "non excisable goods". In view of this decision, Industry wants confirmation on

(a) Since waste and scrap sold are "non excisable goods", no excise duty will be payable and

(b) that for the purpose of Rule 6 (3) the value of clearances of waste and scrap will be treated as 'exempted goods".

The Department replied:

It is seen from the Minutes of the Tariff Conference circulated vide Board's letter F.No.96/85/2015 dated 07.12.2015 that a point raised by the Meerut Zone for discussion and decision on an issue that Bagasse, press mud in sugar factory and Zinc and aluminium ash/dross in non-ferrous metal industry have been held as non-excisable by the Hon'ble Supreme Court in the case of M/s. DSCL Sugar Limited, - 2015-TIOL-240-SC.

The conference noted that Hon'ble Supreme Court in the case of M/s. DSCL Sugar Limited has held that Sections 2(d) and 2(f) of the Central Excise Act, 1944 have to be satisfied conjunctively for imposition of Excise duty under Section 3 of the Act.

Therefore, goods which are not manufactured would not be chargeable to Central Excise duty even after amendment in Section 2(d). However, rule 6(1) of the Cenvat Credit Rules, 2004 has been amended vide notification no. 6/2015-C.E (N.T) dated 1.3.2015, providing that for the purposes of Rule 6 of the CENVAT Credit Rules, 2004, non-excisable goods shall be considered/treated as exempted goods. Therefore, input and input services credit relatable to manufacture of such non-excisable goods would need to be reversed by the assessee in the same way as it is required to be reversed for the exempted goods. Non-excisable goods and exempted goods are required to be treated in the same manner w.e.f. 1.3.2015 under Rule 6 of the CENVAT Credit Rules, 2004.

Therefore, it was made clear that the said clarification was specifically issued with reference to the waste/scrap which are not manufactured/produced from inputs on which Cenvat credit was taken and cannot be generalized to all the types of waste and scrap. Further it was also made clear that the excisability of waste and scrap depends on nature of waste and scrap and is to be decided on a case to case basis.