Incidental waste from duty-paid inputs is not manufacture where no distinct commodity with separate name, use and character emerges.

Waste, scrap and parings of paper and paperboard arising incidentally during the manufacture of empty match boxes were not treated as manufactured goods for excise purposes because they did not emerge as a commercially distinct article with a separate name, use and character. The process involved only use of duty-paid inputs, with no intention to manufacture the waste itself and no new product coming into existence. Mere inclusion of the item in the tariff was insufficient where the essential requirement of manufacture was absent, so the levy of excise duty was not sustainable.

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Issues: Whether waste, scrap and parings of paper and paperboard arising during use of duty-paid inputs in manufacture of empty match boxes amounted to manufacture and attracted excise duty.

Analysis: The governing test is whether the process results in a commercially distinct and new article with a separate name, use and character. The appellant purchased duty-paid paper and paperboard, was not a manufacturer of those inputs, and only used them in making empty match boxes. The waste, scrap and parings arose incidentally from such use, without any intention to manufacture them, and no new product came into existence. Mere mention of the item in the tariff was not sufficient by itself to create excisability where the essential requirement of manufacture was absent.

Conclusion: The waste, scrap and parings were not the result of manufacture and were not excisable; the levy of duty was not sustainable and the assessee succeeded.

Ratio Decidendi: Excise duty is attracted only when the process yields a commercially distinct and new article with separate name, use and character; incidental waste arising from the use of duty-paid inputs, without transformation into such a distinct commodity, does not amount to manufacture.

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