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TMI Blog1986 (12) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... ms that this defective or rejected rubber compound is in the nature of waste. At various stages of the manufacture of the goods, some quantity of rubber cuttings treated as waste also emerges. Then sub-standard and defective goods are destroyed by cutting and punching and is being treated as waste. The claim of the petitioners is that duty of excise is a duty on the event of manufacture as defined in the Central Excises and Salt Act, 1944 (hereinafter called the Act) and since there is no event of manufacture of waste, no duty is leviable. 3. A question had been raised and considered by the Central Board of Excise and Customs whether such waste arising during the processing of tyres should be classifiable under Tariff Item 16-A(2) or 68 of Central Excise Tariff. The Central Board of Excise and Customs noticed that during the process of mixing of rubber compound, a small percentage of stock is rejected due to process, defects such as wrong mixing, overheating etc. and this stock is sold by the manufacturer as "scrap rubber compound" at a price lower than the price of raw rubber put in and similarly during the process of manufacture of tyre, scrap - rubberised fabric are also gener ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as advised to start paying appropriate central excise duty on the waste/scrap that was cleared from the factory after observing all the formalities as required under Central Excise Rules by completion of the formalities under the Act and the Rules. The petitioners then moved this Court by the present writ petition under Article 226 of the Constitution of India. Pending disposal of the petition, the petitioners were allowed future clearances of waste/scrap by execution of a bond in the appropriate form for payment of excise duty if the writ petition was dismissed and giving of a bank guarantee in addition for 25% of the amount of excise duty claimed by the respondents. 6. Excise duty under the Act is on the manufacture and is leviable on manufactured products only. The event of taxation is the manufacture of goods. The incidence of levy of duty of excise can arise only if there is manufacture. Manufacture includes any process incidental or ancillary to the completion of a manufactured product. The charging Section 3 imposes excise duty on the manufacture or production of goods. As such no sooner the process of manufacture or production is completed the liability for excise duty ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that waste/scrap is the result of any treatment or any labour or any manipulation by the petitioner Company whereby a new and different article emerges. At various stages of the manufacture of tyres, tubes, flaps and other rubber products which are admittedly goods manufactured, rubber cuttings and waste is generated and comes into existence. The process whether essential or incidental or ancillary to fall within the ambit of the expression 'manufacture' is one which must have some relation to the manufacture of a finished product. The waste/scrap is obtained not by any process of manufacture but in the course of manufacturing process to produce the end product of tyres, tubes, flaps etc. The waste/scrap is obtained in the course of manufacture and not out of manufacture of the end product. In our opinion, it is not as a result of manufacture, because no one would produce any such degrading or even inferior thing. If the raw material of rubber compound has undertone some change in the process of manufacture so as to turn into waste or scrap, it cannot be equated with any finished product. There is a change but every change in the raw material is not manufacture. There is no transfo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial arising out of goods brought under Rule 56A or under Chapter X or under Rule 173-K, 137-N and 173-P. The list showing the excisable commodities and the manner and method of their Destruction has been specified in para 42.07. In case of Tariff Item No. 16 i.e. Tyres it is "by cutting and punching". If under the Rules, the remission is granted on the goods found unfit for consumption or for marketing on destruction in the manner and method prescribed then there is no warrant to levy duty of excise on the tyres, tubes and flaps which are found unfit for consumption or for marketing by the petitioner himself. After such goods have come into existence during the process of manufacture, then the only method employed by the petitioner himself is of destruction "by cutting and punching" to turn it into waste/scrap. There is no event of manufacture of waste matter and thus no duty can be levied thereon. 11. It is the common case that waste/scrap are capable of fetching some sale price but that cannot be the criterion for the event of manufacture. There are several commodities mentioned in the said para 42.07. Manner and method of destruction in case of each Tariff Item given there i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the proper officer and except in accordance with such procedure as may be prescribed by the Collector, remove from the approved premises any non-excisable goods produced in such premises, or any intermediate or residual product, except waste matter and such other material as may be specified by the Collector in writing. Reality of the manufacturing process is noticed that non-excisable goods can be produced in the factory premises as also any intermediate or residuary product. These cannot be removed except in accordance with the procedure laid down by the Collector. The generation of the waste/scrap in the course of manufacture is also recognised. So far as waste matter is concerned, it has been treated as a non-excisable product with no restrictions on its removal. No amendment has been made even after the introduction of Tariff Item No. 68 introduced for the first time with effect from March 1, 1975. Waste matter is still treated as non-excisable in Rule 50. 14. We are not impressed with the submission of Shri S.K. Misra, the learned Counsel for the respondent that the scrap/waste obtained in the course of manufacture of tyres, tubes, flaps and other products by the petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to carry on business in Kolsi was attributed to the Company. Waste caustic liquor was also regarded as a by-product or a subsidiary product in the course of manufacture and its sale thereof was incidental to the business of the Company. It is on those facts that the Supreme Court held that the turnover in respect of both Kolsi and waste caustic liquor would be liable to sales-tax. The decision was concerned on the interpretation with regard to an activity as business and not to event of manufacture. We put a question as to whether cotton waste obtained in the manufacture liable to excise duty or not. It was conceded that the of cotton fabrics in a textile manufacturing unit is cotton waste obtained in the course of manufacture of cotton fabrics is not goods laible to excise duty. In Tariff Item No. 19 of C.E.T., the entry relates to cotton fabrics and cotton waste is not included therein. 16. For the above reasons, we are of the opinion that the waste/scrap obtained in the course of manufacture by the petitioner Company are not goods. There is no event of manufacture of waste/scrap and as such no duty of excise can be levied on such waste/scrap. The writ petition is allowed. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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