Waste and testing samples not excisable: used bottles sold as scrap and retained water samples escaped duty.

Damaged, used polycarbonate bottles sold as scrap did not amount to manufacture of excisable plastic scrap, because prolonged use and subsequent disposal as waste involved no manufacturing process and waste does not become excisable merely by being sold for value. Control samples of purified water retained solely for shelf-life testing and complaint analysis were not liable to excise duty, as they were mandatorily drawn for testing, were not shown to have been cleared for sale, and mere absence of accounting records was insufficient. The impugned demand, interest, and penalties were therefore set aside.

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Issues: (i) whether damaged, used polycarbonate bottles sold as scrap amounted to manufacture of excisable plastic scrap; (ii) whether control samples of purified water retained for shelf-life testing and complaint analysis were liable to excise duty.

Issue (i): whether damaged, used polycarbonate bottles sold as scrap amounted to manufacture of excisable plastic scrap.

Analysis: The bottles were reusable for several cycles and were sold only after prolonged use and damage. The disposal of old, used bottles as scrap did not involve any manufacturing process. Waste or scrap arising from use of goods does not become excisable merely because it is sold for value. The cited principles on waste and scrap applied to the facts.

Conclusion: The issue was decided in favour of the assessee. The demand on plastic scrap was not sustainable.

Issue (ii): whether control samples of purified water retained for shelf-life testing and complaint analysis were liable to excise duty.

Analysis: The samples were mandatorily drawn for testing under regulatory norms and were kept for shelf-life testing and customer-complaint analysis. There was no evidence that the samples were cleared for regular sale or otherwise removed from the factory, and mere absence of accounting records was insufficient to sustain the demand. Samples consumed or destroyed in testing are not excisable goods.

Conclusion: The issue was decided in favour of the assessee. The duty demand on control samples was not sustainable.

Final Conclusion: The impugned demand, interest, and penalties were set aside and the appeal was allowed with consequential relief according to law.

Ratio Decidendi: Waste arising from prolonged use of goods, and samples retained solely for mandated testing and consumed or destroyed in that process, are not excisable goods in the absence of manufacture or evidence of dutiable clearance.

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