Scrap from machinery repair is not excisable duty when it does not arise from manufacture of a new commodity.

Waste and scrap arising only from repair and maintenance of machinery in a 100% EOU was held not exigible to central excise duty because excise applies only where goods result from manufacture and are excisable. Applying the principle in Grasim Industries Ltd., the Tribunal found that such scrap did not arise from the manufacturing process of the end product, did not become a new and distinct excisable commodity, and was not a by-product of manufacture. As the conjunctive requirements of manufacture and excisability were not met, the duty demand could not be sustained.

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Issues: Whether waste and scrap arising from repair and maintenance of machinery in a 100% EOU is exigible to central excise duty.

Analysis: The demand was tested against the settled principle that excise duty is attracted only when goods satisfy the requirements of manufacture and excisability. Applying the ratio in Grasim Industries Ltd., the Tribunal held that scrap generated from repair and maintenance of machinery does not arise from the manufacturing process of the end product, does not result in a new and distinct excisable commodity, and is not a by-product of manufacture. As the alleged waste and scrap did not satisfy the conjunctive requirements of excisability under the charging provision and the definition of manufacture, the duty demand could not be sustained.

Conclusion: The issue was answered in favour of the assessee; the waste and scrap were held not liable to duty.

Ratio Decidendi: Scrap arising only from repair and maintenance activity, and not from a manufacturing process producing a new excisable commodity, is not liable to central excise duty.

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