Excise duty on scrap from machinery repairs rejected where the scrap was not manufactured goods and was merely sold.

Metal waste and scrap generated during repair, maintenance, dismantling, replacement, expansion and upgradation of plant and machinery used in cement manufacture is not treated as excisable goods where it does not arise from a manufacturing process producing a marketable product. The settled position applied is that such scrap from capital goods is not a subsidiary product of cement and does not attract central excise duty merely because it is sold. On that basis, the duty demand on the cleared scrap was not sustainable and the assessee was held not liable to excise duty.

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Issues: Whether metal waste and scrap arising from repair, maintenance, dismantling, replacement, expansion and upgradation of plant and machinery is liable to central excise duty as excisable goods.

Analysis: The scrap in question arose from repair and maintenance of capital goods used in cement manufacture, and not from any manufacturing process producing a marketable excisable product. The settled position applied was that metal scrap generated during repair, maintenance or dismantling of machinery cannot be treated as a subsidiary product of cement or as waste and scrap of metals attracting excise duty merely because it is sold. The cited decisions consistently held that such scrap from capital goods is not manufactured goods and falls outside the levy.

Conclusion: The metal waste and scrap cleared by the assessee is not liable to central excise duty and the demand could not be sustained; the issue is decided in favour of the assessee.

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