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Regarding 100% <a href='http://www.eximguru.com/exim/eou/default.aspx'>EOU</a>/ EPZ Scheme - Sub-contracting/ Job-work - Removal of
scrap for recycling and conversion
Circular No. 15 dated 8th
March 1996
I am directed to
invite reference to the circular letter of even No. dated 27th October, 1994 on
the above mentioned subject, wherein it was clarified that scrap is a
semi-finished item and the facility of sub-contracting by 100% EOU/ EPZ Units
for recycling of scrap into ingots outside such units in the DTA can be allowed
in terms of the instructions issued vide F.No.305/ 107/ 93-FTT dated 31.1.1994.
A doubt has been raised in this regard whether scrap can be cleared from the
units for jobwork in DTA free of duty for conversion to ingot and whether the
ingot can there be taken back by EOU as raw material, free of duty and whether
this process of conversion of scrap to ingot amounts to a manufacturing process.
2. The
matter has been re-examined by the Board and it is clarified that conversion of
scrap into ingots involves a complete process of manufacture. The work of
recycling cannot be treated part of jobwork on the goods being protected by the
EOU. This activity would also not be covered under para 2(a) Notification No. 1/
95-CE under which goods can be taken to DTA in certain circumstances without
payment of duty. The scrap, therefore, cannot be taken out duty free from the
EOU, as such will have to be removed on payment of appropriate excise duty in
terms of Central Excise Not. No.2/ 95 dated 4.1.1995. However, the ingots, after
conversion, can be brought back into the EOU without payment of duty in terms of
Not. 1/ 95-CE dated 4.1.1995 on a CT-3 certificate for further use in the units
as raw material.
3. In
this regard the decision of the Supreme Court on Job-work in the Prestige
Engineering case 1994 (73) ELT 769 (SC), may be referred to. According to the
ratio of this decision removal of scrap to DTA for recycling, to obtain ingot
can into be treated as job-work, because it results into a manufacturing a
totally new article.
4.
On the basis of the above stated clarification. Commissioners of Customs
and Central Excise are requested for re-examination of the cases where such
" permissions have been issued by them. If such permission have been
issued, for demand for payment of duty can also be issued under Section IIA (i)
of Central Excise Salt Act.
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