Rule 6 liability does not extend to waste slag generated during manufacture and sold occasionally as such.

Slag generated incidentally during manufacture and collected in a slag pot was treated as waste, not as a final exempted product. Rule 6 liability applies only where exempted final products are manufactured, and does not extend to waste or scrap arising in the manufacturing process. Occasional sale of slag did not alter its character. On that basis, the demand and penalty were held unsustainable and were set aside.

---

---

Issues: Whether slag emerging during manufacture and removed as such is a final product so as to attract Rule 6 liability.

Analysis: Slag arose during the course of manufacture of the assessees final products and was collected in a slag pot. Its occasional sale to customers did not change its character as waste. Rule 6 applies to exempted final products and not to waste or scrap generated in the manufacturing process. The decision relied upon the settled principle that the 10% liability is attracted only when exempted final products are manufactured, and not when waste emerges incidentally.

Conclusion: Rule 6 was not applicable to the slag, since it was a waste product and not a final product. The demand and penalty were unsustainable and were set aside in favour of the assessee.

---