Metal scrap from fabrication of spare parts is excisable when generated through manufacturing or mechanical working of metals.

Metal waste and scrap generated while fabricating spare or replaceable parts from plates, sheets, channels, beams and similar metal inputs is excisable if it arises from mechanical working or a manufacturing process. Section Note 8(a) of Section XV of the Central Excise Tariff Act treats such waste and scrap as covered where it results from manufacture or mechanical working of metals, and section 2(f) of the Central Excise Act extends manufacture to incidental or ancillary processes. The fact that the fabricated parts are intended only for internal repair and maintenance does not exclude duty liability.

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Issues: Whether metal waste and scrap generated by cutting of plates, sheets and similar material in the workshop and plant for making parts for repair and maintenance of plant and machinery is exigible to excise duty.

Analysis: Section Note 8(a) of Section XV of the Central Excise Tariff Act, 1985 covers metal waste and scrap arising from manufacture or mechanical working of metals and metal goods. The definition of manufacture in section 2(f) of the Central Excise Act, 1944 is inclusive and extends to processes incidental or ancillary to completion of a manufactured product. Scrap generated while fabricating replaceable parts or spare parts in the workshop from plates, sheets, channels, beams, angles and similar material is therefore attributable to a manufacturing process, even if the fabricated part is intended for internal use in repair and maintenance. The fact that the scrap arises in the course of such fabrication, rather than in the production of the final product, does not exclude excisability.

Conclusion: The waste and scrap in question is dutiable and the demand and penalty could not have been set aside.

Ratio Decidendi: Metal waste and scrap generated in the course of fabricating spare or replaceable parts by mechanical working of metals is excisable when it arises from a manufacturing process within the meaning of section 2(f) and falls within Section Note 8(a) of Section XV.

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