Waste and scrap classification failed where the Revenue did not prove dutiability or the statutory factual basis.

Cleared machinery parts and scrap could not be taxed as waste and scrap under SH 7204.90 because the Revenue did not plead or prove the factual foundation required by Section Note 8(a) of Section XV of the Central Excise Tariff Act, 1985. The record did not establish which items arose from manufacture, which arose from wear and tear, or that the goods met the statutory definition of waste and scrap. As the burden to prove dutiability lay on the Revenue and was not discharged, the duty demand failed, and the connected penalties based on that demand also failed.

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Issues: Whether the cleared machinery parts and scrap were shown to be "waste and scrap" falling under SH 7204.90 so as to justify the duty demand and consequential penalties.

Analysis: The notice proceeded on a broad assertion that the scrap was classifiable as waste and scrap, but did not plead the factual foundation required by Section Note 8(a) under Section XV of the Schedule to the Central Excise Tariff Act, 1985. The record showed that the department had not established which items arose from manufacture, which arose from wear and tear, or that the goods satisfied the statutory definition in the manner alleged. The burden to prove dutiability lay on the Revenue, and it was not discharged. In the absence of the necessary factual allegations and proof, the demand based on SH 7204.90 could not be sustained; the penalties founded on the same demand also failed.

Conclusion: The goods were not proved to be dutiable waste and scrap, and the duty demand and penalties were set aside in favour of the assessee.

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