Manufacture and excisability test: waste and scrap cleared from a factory were not liable to central excise duty.

Excise duty was held inapplicable to impure dowtherm diphyl, PTA scrap, wash water, sludge oil, used oils and old bearings cleared from the factory as scrap or waste because duty arises only when goods are both excisable and manufactured. The record showed the items were old, used, damaged or waste materials, with no evidence that they were brought into existence through a manufacturing process as new and distinct products. Mere commercial sale or receipt of consideration did not convert waste into manufactured goods, and marketability alone was insufficient without manufacture. The disputed items were therefore not liable to central excise duty, and the assessee prevailed.

---

---

Issues: Whether items such as impure dowtherm diphyl, old and damaged PTA scrap, wash water, sludge oil, used oils and old bearings cleared from the factory as scrap or waste were liable to central excise duty as manufactured goods.

Analysis: Excise duty is attracted only when goods satisfy the statutory requirements of being excisable goods and of having been manufactured. The items described in the record were old, used, damaged or waste materials, and there was no material to show that they were manufactured products or distinct products brought into existence by any process of manufacture. Mere sale on commercial invoices or receipt of consideration did not convert such waste into manufactured goods. The reasoning was consistent with the principle that marketability alone is insufficient unless manufacture is established, and with the view that waste or residue emerging in the course of manufacture is not dutiable absent a manufacturing process creating a new and distinct product.

Conclusion: The disputed items were not liable to excise duty, and the assessee succeeded while the Revenue's appeal failed.

---