Manufactured scrap may qualify as a separate product, but exemption stays confined to the eligibility certificate's specified coverage.

Scrap generated during the manufacturing process may qualify as a manufactured product if it emerges as a separate, distinct and marketable commodity, and the concept of manufactured goods can extend beyond the principal product to by-products or ancillary products. However, exemption remains confined to the scope of the eligibility certificate, and the dealer cannot claim benefit for goods not expressly covered unless the certificate is amended or challenged. On that basis, the revisional notice was not interfered with because the certificate limited exemption to specified products.

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Issues: (i) Whether scrap generated in the course of manufacturing the principal products could be treated as a product manufactured in the industrial unit for purposes of exemption. (ii) Whether the suo motu revisional notice was liable to be interfered with when the eligibility certificate restricted exemption to specified products.

Issue (i): Whether scrap generated in the course of manufacturing the principal products could be treated as a product manufactured in the industrial unit for purposes of exemption.

Analysis: Scrap arising during the manufacturing process was distinguished from rejected or unused raw material. It was held that scrap produced in the course of manufacture undergoes transformation, acquires a separate identity and use, and may be a distinct marketable commodity. The reasoning drew support from the principle that a manufactured product need not be the principal product, and that by-products or ancillary products can also fall within the concept of goods manufactured in the unit.

Conclusion: Yes. Scrap generated in the course of manufacture can qualify as a product manufactured in the industrial unit.

Issue (ii): Whether the suo motu revisional notice was liable to be interfered with when the eligibility certificate restricted exemption to specified products.

Analysis: The exemption under the statutory scheme operated through the eligibility certificate, and the dealer could not ordinarily claim benefit beyond what the certificate expressly covered. Although the wider statutory language referred to goods manufactured in the unit, the certificate in question named only specified products, and the dealer had not sought amendment or challenged the certificate itself. On that footing, the revisional notice was not vitiated merely because scrap might otherwise be capable of being treated as a manufactured product.

Conclusion: No. Interference with the revisional notice was declined.

Final Conclusion: The legal position on scrap was answered in the petitioner's favour, but the impugned revisional notice was upheld to the extent that the certificate limited exemption to specified products.

Ratio Decidendi: Scrap generated in the course of manufacture may be treated as a manufactured product if it emerges as a separate marketable commodity, but exemption is confined to the scope of the eligibility certificate unless that certificate is modified or challenged.

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