Scrap from broken glass bottles is not dutiable absent a deeming provision under the Cenvat regime.

Scrap of broken glass bottles cleared by a manufacturer was held not liable to duty. The Tribunal distinguished Rule 57F(5), which treated waste arising from processing inputs as dutiable, from the Cenvat Credit Rules, which contain no equivalent deeming provision. Relying on Dhillon Kool Drinks & Beverages, affirmed by the apex court, it noted that scrap from broken bottles during filling and handling is neither generated in the course of manufacture of glass bottles nor a manufactured product. An earlier order in the assessee's own case had also remained unchallenged. On that basis, the scrap was not chargeable to duty and the appeal was allowed.

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Issues: Whether scrap of broken glass bottles cleared by the manufacturer was liable to duty.

Analysis: The provision relied upon by revenue, Rule 57F(5), treated waste arising from processing of inputs as dutiable and created a deeming fiction for removal on payment of duty. The Tribunal distinguished that regime from the Cenvat Credit Rules, which contained no similar provision. The decision in Dhillon Kool Drinks & Beverages, as affirmed by the apex court, had already held that scrap arising from broken bottles during filling and handling was neither generated in the course of manufacture of glass bottles nor could it be treated as a manufactured product. In identical circumstances, the earlier appellate order in the assessee's own case had also gone unchallenged.

Conclusion: The scrap of broken glass bottles was not chargeable to duty, and the appeal was allowed in favour of the assessee.

Ratio Decidendi: In the absence of a provision equivalent to Rule 57F(5), scrap arising from breakage of used glass bottles during manufacture is not dutiable merely because MODVAT or Cenvat credit was availed on the inputs.

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