Excise duty on manufacturing waste fails where residue is not shown to be excisable or manufactured goods.

Central excise duty was considered in relation to waste paper, aluminium foil waste and oil/sludge waste generated during cigarette manufacture and packing. The governing principle applied was that duty arises only on manufacture of excisable goods; waste or residue is not dutiable unless it satisfies the test of manufacture and is otherwise excisable in law. The Tribunal noted prior favouring treatment of the same issue for a later period, the absence of challenge by the Department, and consistent authority holding such wastes non-excisable. On that basis, the waste materials were treated as not liable to central excise duty and the assessee's challenge succeeded.

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Issues: Whether waste paper, aluminium foil waste and oil/sludge waste generated during the manufacture and packing of cigarettes were liable to central excise duty.

Analysis: The dispute turned on the settled principle that central excise duty is attracted only on manufacture of excisable goods. The Tribunal noted that the same issue for a subsequent period had already been decided in the assessee's favour and that the Department had not challenged that view. It also noted that the cited authorities consistently held that the relevant wastes were not excisable. In the absence of any contrary authority from the Revenue, the impugned order could not be sustained.

Conclusion: The waste materials were not liable to central excise duty and the appeal succeeded in favour of the assessee.

Ratio Decidendi: Excise duty cannot be levied on waste or residue unless the material answers the test of manufacture and is shown to be excisable in law.

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