CIR NO.724/40/2003-CX, DT. 20/06/2003

Clarification on the availability of the exemption under notification Nos. 83/94 and 84/94 both dated 11.4.94, in view of the amendments made by the Finance Bill 2003-04

I am directed to state that certain doubts have been raised by manufacturers of Bicycle Tube Valve (sub-heading Nos. 8481.20 & 8481.92) and Bicycle Spoke Nipples (heading No. 87.14),which are fully exempt under notification No. 10/2003-Central Excise, dated 01.03.2003, regarding admissibility of the exemption under notification Nos. 83/94-CE and 84/94-CE both dated 11.4.94. These manufacturers are reportedly supplying scrap (heading No. 7404.90) to their job workers for conversion into casting on job work basis. On receiving the casting from the job workers under the exemption notification No. 83/94-Central Excise, dated 11.04.94, the same are used by them in the manufacture of the aforesaid final products. During the course of manufacture of these final products i.e. valves and nipples, substantial quantity of scrap (up to 75% by weight approximately) is generated. Such scrap is exempt under the notification No. 10/2003-Central Excise.

2. For the purpose of enabling the job workers to avail of the benefit of the exemption under notification No. 83/94-CE the principal manufacturer has to give following undertaking :

(a). that the specified goods received from the job-workers shall be used in the factory of such supplier in or in relation to the manufacture of specified goods which are exempted from the whole of the duty of excise leviable thereon under the aforesaid notifications (i.e. SSI notification Nos. 8/2003-CE and 9/2003-CE both dated 01.03.2003) or goods falling heading Nos. 74.17, 84.36, 84.37, 87.14 or 96.08 or sub-heading Nos. 7321.90, 8424.10, 8424.91, 8481.20, 8481.92, 9017.10 or 9405.10 of the First Schedule to the Central Excise Tariff Act, 1985, as the case may be; and

(b). that in the event of his failure to do so, he undertakes to pay excise duty, if any payable on such goods, but for the exemption contained in this notification, as if such goods were manufactured by the said supplier and sold on his own account.

3. Thus, in the aforesaid case, the principal manufacturer is required to give an undertaking to the effect that the castings so received from the job workers under the said notification No. 83/94-CE are to be used in or in relation to the manufacture of specified goods which are exempted from the whole of the duty of excise leviable thereon under the SSI notifications, or goods falling under sub-heading Nos. 8481.20, 8481.92 or heading No. 87.14. Since the waste and scrap, generated at the end of the principal manufacturer, during the course of the aforesaid final products (i.e. the goods falling under sub-heading Nos. 8481.20, 8481.92 or heading No. 87.14), though exempt under the Notification No. 10/2003-CE, is neither exempt under the said SSI notifications nor is it specified goods in the Annexure to these SSI notifications, such principal manufacturers have doubt that they will not be able to give the above mentioned undertaking and as such, benefit of the said notification No. 83/94 may be denied by the Central Excise Department.

4. The matter has been examined. If the castings, so received from the job workers’ end, are used in the manufacture of the aforesaid specified final products, namely valves (sub-heading Nos. 8481.20 and 8481.92) and nipples (heading No. 87.14), the exemption would be available, notwithstanding the fact that some waste and scrap is generated in the process. The generation of waste and scrap is only incidental to the manufacturing process of these final products, and it can not be said that the castings (proportionate to the weight of the quantity of waste and scrap generated) have not been used in the manufacture of such specified final products. The percentage of waste generation is not relevant for deciding the admissibility of these exemption notifications, so long as the castings are used for manufacture of the specified final products.

Sd/-
( Alok Shukla )
Director (TRU)

F No.332/6/2003-TRU

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