1. The appellant company is engaged in the manufacture of motor vehicles ( 2 wheelers & 3 wheelers) falling under Chapter sub-heading 877 and 8703 of the Schedule to the CETA 1985. The company was availing modvat credit on inputs such as Aluminium ingots. It was clearing the Aluminium Ingots under rule 57F(4) to the job workers for manufacture of Aluminium castings. The goods removed under 57F(4) chalans were received back after the job work was completed. The weight of the castings thus received did not tally with the weight of the Aluminium ingots sent under rule 57F(4) because the appellant did not receive the waste and scrap from the job worker. The allegation of the department is that when inputs are sent under rule 57F(4) as manufacturer is supposed to receive back any waste and scrap which arises in the manufacture of goods in a job workers hands. Since no evidence has been put forth by the appellant company that such waste and scrap has suffered duty in the hands of the job worker a demand has been raised against the appellant company on the waste and scrap. The appellants contention however is that no waste and scrap has arisen when the ingots were converted into castings but only dross and ash and residues was generated during the process of Aluminium die castings. It is contended hat since dross ash and residue do not fall under the definitions of waste and scrap no duty needs to be paid on such goods.
It is also submitted that dross ash and residues are different items manufactured by the job worker and if any duty is payable on it, it is the responsibility of the manufacturer (job worker) and not of the appellant company who sent the inputs to the job worker.
3. The appellant company was working under MODVAT scheme. Rule 57F(4) provides for sending inputs for job work and an assessee who sends such inputs is expected to receive back the finished/semi finished goods within a given time or within such extended period. Admittedly, the finished goods were received back. The only dispute pertains to scrap and waste that arises out of the working of the inputs in the hands of the job worker. An assessee who sent the inputs for job work has to account for the waste and scrap that arises out of the duty paid inputs on which he has taken modvat credit. The appellants contention that dross ash and residue do not fall under the definition of waste and scrap has to be rejected at the outset. Once the inputs are sent out for job work, an assessee is expected to get back the inputs as well as any resultant product that comes out as otherwise the resultant product, escapes duty even when the assessee has taken credit. It is for this reason the Rule provides that the waste and scrap that arises out of the input should also be either brought back or are removed on payment of duty. Investigation revealed that the appellant company failed to produce evidence to establish that duty was discharged on dross, ash and residues. Since the appellants have not disclosed the fact that they were not receiving back the so called waste and scrap, larger period of limitation was invoked and duty on such dross ash and residues was demanded. We observe that the appellant company at no stage has disclosed the fact that some waste has arisen out of the manufacture of the input sent under rule 57F(4) challan. We therefore hold that larger period of limitation is inviolable in the present case. The appellants plea that dross ash residues are goods manufactured of job work and if any duty has to be paid it should be paid by the job worker has to be rejected. Once the goods are sent under rule 57F(4) challan it is the responsibility of the sender to account for the inputs in full. We, therefore, do not accept that the job worker is a manufacturer of dross ash and residues and therefore he should discharge the duty.
4. The lower authority has also imposed penalty under Section 11AC of the Central Excise Act, we hold that under the circumstances described above a penalty is imposable on the company. However, having regard to the circumstances we reduce the penalty to Rs. 3 lakhs on the appellant company. We set aside the penalty imposed under rule 173Q as we consider that penalty imposed under section 11AC is sufficient and meets the ends of justice. The lower authority has also imposed penalty under rule 209A on the Vice President of the appellant company. The impugned order does not indicate as to how a Vice President of the company is involved in not bringing back ash dross and residues from the job worker. We therefore set aside the penalty. The lower authority had also imposed a penalty of Rs.35,000/- on the Senior Manager (internal audit) of the appellant company. We find no justification in imposing a penalty on some one who is in charge of internal audit of assesses company. A penalty of Rs.1,50,000/- is imposed on the operational Manager as he is a person who is involved in day to day transactions of the appellant company. We hold that a penalty is imposable on him, we reduce the penalty to Rs.1000/- as he was only an employee of the appellant company. Interest liability as ordered by the Commissioner is upheld. The appeals are disposed of in the following terms:- (d) penalty under rule 209A on the Vice President and Senior Manager Audit (e) penalty on the Manager (operations) reduced to Rs.1000/- set aside