Incidental waste and scrap cannot be added to clearance value for small-scale exemption when not themselves manufactured goods.

For small-scale exemption under Notification No. 1/93, the aggregate value of clearances must be computed only with reference to specified goods manufactured and cleared by the unit. Waste and scrap arising incidentally in the manufacture of brass parts were not themselves manufactured goods of the assessee, and their value could not be added to the clearance value merely because the scrap was sent out for re-melting and recycling under Rule 57F(5). On that basis, the value of such scrap was held not includible in the aggregate value for exemption purposes, and the demand based on its inclusion did not survive.

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Issues: Whether waste and scrap arising in the manufacture of parts and sent outside the factory for recycling under Rule 57F(5) could be included in the aggregate value of clearances for the purpose of exemption under Notification No. 1/93.

Analysis: The exemption was available to specified goods manufactured and cleared by a small-scale unit, and the aggregate value had to be computed with reference to such specified goods. The unit manufactured brass parts and did not manufacture waste and scrap; the scrap merely arose incidentally during manufacture. Since the scrap was not itself specified goods manufactured by the assessee, its value could not be added while computing the aggregate value of clearances. The fact that the scrap was sent out for re-melting and retrieval of metal for further use did not alter this position.

Conclusion: The value of the waste and scrap was not includible in the aggregate value for Notification No. 1/93, and the issue was decided in favour of the assessee.

Final Conclusion: The appeal was allowed with consequential relief, and the demand based on inclusion of scrap value did not survive.

Ratio Decidendi: For a small-scale exemption based on aggregate value of specified goods, incidental waste and scrap arising in manufacture cannot be treated as goods manufactured by the assessee and cannot be included in the clearance value merely because it is sent outside for recycling.

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