Excise duty on repair scrap fails where waste from machinery maintenance is not manufacture of a new and distinct article.

Excise duty applies only where goods are manufactured in the statutory sense and are excisable goods. A tariff entry or section note may determine classification and rate, but it does not deem a process to be manufacture unless the statute expressly says so. Manufacture requires transformation into a new and distinct article with separate identity, character or use. Metal scrap and waste generated merely during repair and maintenance of machinery were only by-products of that work, not products of the manufacturing process, and therefore did not arise from manufacture of the final goods. The scrap was not liable to excise duty on that basis.

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Issues: Whether metal scrap and waste generated during repair and maintenance of machinery and plant amount to manufacture and are liable to excise duty.

Analysis: The charging provisions apply only when goods are both excisable goods and manufactured goods. A tariff entry or section note may identify the goods for classification and rate purposes, but it does not by itself deem the underlying process to be manufacture unless the statute expressly so provides. Manufacture requires a transformation resulting in a new and distinct article with a separate identity, character or use. The repair and maintenance of worn-out machinery used in cement production did not contribute to the manufacture of cement, and the scrap generated in that process was only a by-product of repair work, not a subsidiary product of the manufacturing process. The scrap therefore did not arise from manufacture in relation to the end product.

Conclusion: Metal scrap and waste arising from repair and maintenance of machinery are not the result of manufacture and are not liable to excise duty on that basis.

Final Conclusion: The demand of duty and penalty on the generated scrap could not be sustained, and the assessee succeeded in the appeal.

Ratio Decidendi: Excise duty is chargeable only when the goods are manufactured in the statutory sense, and a scrap or waste product generated merely from repair and maintenance, without transformation into a new and distinct marketable article, is not manufacture.

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