Waste and Scrap from Repair Work Not Excisable When No New Marketable Product Emerges

Waste and scrap generated during repair or manufacture of stators and rotors were held not to be excisable goods, because no new marketable commodity emerged and the activity did not amount to manufacture. The copper scrap and burnt enamelled winding wire were therefore not liable to duty. On limitation, the Tribunal found that the assessee had disclosed the scrap generation to the Department and had sought clarification on duty liability, so there was no suppression of facts or wilful misstatement. The extended period could not be invoked and the demand was time-barred.

---

---

Issues: (i) whether the copper scrap and burnt enamelled winding wire generated in the repair centre or during manufacture of stators and rotors were excisable goods and amounted to manufacture; (ii) whether the demand was barred by limitation and the extended period could be invoked for suppression of facts.

Issue (i): whether the copper scrap and burnt enamelled winding wire generated in the repair centre or during manufacture of stators and rotors were excisable goods and amounted to manufacture.

Analysis: The Tribunal applied the settled principle that waste and scrap of wires and cables, including end cuttings and unserviceable pieces, do not become excisable goods merely because they emerge during repair or manufacturing activities. The cited precedents held that such remnants are not marketable goods and that no process of manufacture brings into existence a new commodity. On that basis, the activity of repairing damaged compressors was not treated as manufacture, and the copper scrap and burnt enamelled winding wire generated in the process was held not to be dutiable.

Conclusion: The issue was decided in favour of the assessee and against duty liability on the scrap.

Issue (ii): whether the demand was barred by limitation and the extended period could be invoked for suppression of facts.

Analysis: The record showed disclosure by the assessee to the Department of the scrap generated in the centre and correspondence seeking clarification on duty liability. In view of such disclosure, the Tribunal found no suppression of facts or wilful misstatement. Consequently, the ingredients required for invoking the extended period were absent.

Conclusion: The extended period of limitation was not invocable and the demand was time-barred, in favour of the assessee.

Final Conclusion: The assessee's appeal was allowed and the Revenue's appeal was rejected, leaving the demand unsustainable.

Ratio Decidendi: Waste and scrap generated during repair or manufacturing operations are not excisable goods unless a new marketable commodity emerges, and the extended period of limitation cannot be invoked in the absence of suppression where the material facts were disclosed to the Department.

---