Cir. No. 36/36/94-CX.8

Subject : Central Excise - Accounting, storage and clearance of scrap of metals - Procedure - Regarding.

The Collector of Central Excise, Bombay-II has expressed certain doubts as to the accounting of scrap of metals and other materials arising during the course of manufacture of various excisable products, for the purpose of levy of excise duty consequent upon the changes brought about by Budget 1994-95. A copy of his letter is enclosed for ready reference.

2. On a perusal of the aforesaid reference, the issue can be summarised into the following points :

(i) Accounting of waste and scrap-RG-1 Stage whether shift-wise or at the end of the day;

(ii) Provision of bonded store room;

(iii) Storage loss,

(iv) Recycling/captive consumption of waste and scrap and duty liability thereof.

(v) Assorted scrap - its valuation and classification.

3. The Board has examined the issue. The following procedure is suggested for the disposal of waste and scrap.

(i) Waste and scrap generated at various stages of manufacture should be collected at the end of the day and a consolidated entry may be made in RG-1. There need not be any shift account.

(ii) As regards bonded store room, certain adjustments have to be made in respect of waste and scrap. In place like Bombay, waste and scrap is stored within the factory premises at different places. There may not be any junk yard specifically meant for storage of waste and scrap because of shortage of space. Keeping in view the local situation, Asstt. Collector may permit storage of waste and scrap scattered at different parts of the factory premises. Each such place should be treated as BSR for the purpose of waste and scrap.

(iii) As regards storage loss, the problem has to be settled as per the existing instructions on this issue. Remission of duty may be allowed within the existing parameters.

(iv) Regarding the classification and valuation of assorted scrap, the Collectors have to rely upon Note 5 of Section XV dealing with Base Metals and Articles of Base Metals. The principles of predominance by weight will prevail.