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Government of India
Ministry of Finance
Department of Revenue
Central Board of Excise and Customs
Circular No. 1029/17/2016-CX
New Delhi, Dated the 10th May, 2016
To
The Principal Chief Commissioners/ Chief Commissioners/Principal Commissioners
of Central Excise (All)
The Principal Chief Commissioners/ Chief Commissioners/ Principal Commissioners
of Central Excise & Service Tax (All)
Webmaster
Sub: Clarification on segregation of impurities viz. iron, steel,
rubber, plastic, dust etc. front honey grade brass scrap-reg.
Madam/ Sir,
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 said 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 said
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.
- The issue has been examined. Segregation from honey grade brass scrap in
order to weed out other foreign materials before the process of melting in
the furnace is an essential process relating to manufacture of brass
articles. The foreign materials, emerging during the process of segregation
have to be treated as process waste and cannot be treated like removal of
inputs as such. The segregated foreign material has an altogether different
character and use vis-a-vis brass scrap. Value per unit and classification
of the segregated foreign material is also different from that of imported
brass scrap. Accordingly, clearance of foreign material such as iron, steel,
rubber, plastic, dust etc. cannot be treated as clearance of inputs as such.
It may be noted that circular no. 62/2001-Cus dated 12.11.2001 does not
apply to the issue at hand as the facts at hand are different.
- In view of above, it is clarified 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, as has been
explained above, shall be cleared on payment of Central Excise duty on
transaction value as per its appropriate classification and rate of duty
determined on merits.
- Difficulty faced, if any, in implementing the circular should be brought
to the notice of the Board. Hindi version will follow.
(ROHAN)
Under Secretary to the Govt. of India
F. No. 267/33/2014-CX.8
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