Excise duty on wear-and-tear scrap denied where ingot mould scrap was not generated by manufacturing process.

Scrap arising from wear and tear of ingot moulds in a unit operating under Section 3A was held not liable to central excise duty because it did not arise from any manufacturing process. The governing distinction was that scrap generated through manufacture or mechanical working may attract duty, whereas scrap caused by dismantling or incidental wear and tear does not where no manufacturing activity produces it. On that basis, the duty demand was unsustainable and the appeal succeeded.

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Issues: Whether scrap arising from wear and tear of ingot mould in a unit working under Section 3A was liable to central excise duty.

Analysis: The scrap in question arose from wear and tear of the ingot mould and not from any manufacturing process. The applicable principle was that scrap generated from mechanical working or manufacture may attract duty, but scrap arising from dismantling or incidental wear and tear does not, where no manufacturing process is involved.

Conclusion: The scrap was not liable to excise duty. The demand was unsustainable and the appeal succeeded.

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