1986 (12) TMI 41 - HC - Central Excise

Summary

Issues Involved:
1. Classification of waste/scrap under Tariff Item 68 of C.E.T.
2. Liability of excise duty on waste/scrap.
3. Definition and scope of "manufacture" and "goods" under the Central Excises and Salt Act, 1944.
4. Applicability of Rule 49 and Rule 50 of the Central Excise Rules, 1944.

Summary:

1. Classification of waste/scrap under Tariff Item 68 of C.E.T.:
The primary issue is whether waste/scrap obtained during the manufacture of tyres, tubes, flaps, and other products by the petitioner company are "goods" classifiable under Tariff Item 68 of C.E.T. and liable to excise duty. The Central Board of Excise and Customs had classified such waste under Tariff Item 68, leading to the issuance of trade notices and directives to the petitioner company.

2. Liability of excise duty on waste/scrap:
The petitioner company argued that excise duty is a duty on the event of manufacture as defined in the Central Excises and Salt Act, 1944, and since there is no event of manufacture of waste, no duty is leviable. The court examined whether the waste/scrap generated during the manufacturing process could be considered as goods resulting from manufacture.

3. Definition and scope of "manufacture" and "goods" under the Central Excises and Salt Act, 1944:
The court referred to the Supreme Court's interpretation in "Union of India v. Delhi Cloth Mills" and "S.B. Sugar Mills Ltd. v. Union of India," which stated that manufacture implies a change resulting in a new and different article with a distinctive name, character, or use. The court concluded that waste/scrap is not the result of any treatment, labour, or manipulation by the petitioner company whereby a new and different article emerges. The waste/scrap is obtained in the course of manufacture and not as a result of the manufacture of the end product.

4. Applicability of Rule 49 and Rule 50 of the Central Excise Rules, 1944:
Rule 49 provides for duty chargeable only on removal of goods from the factory premises, and the proper officer may not demand duty on goods unfit for consumption or marketing. Rule 50 deals with non-excisable products and their removal from the factory premises. The court noted that waste matter is treated as non-excisable under Rule 50, and no amendment has been made to classify waste/scrap as excisable goods under Tariff Item 68.

Conclusion:
The court held that the waste/scrap obtained in the course of manufacture by the petitioner company are not goods and there is no event of manufacture of waste/scrap. Consequently, no duty of excise can be levied on such waste/scrap. The writ petition was allowed, and the impugned directives were quashed.