Scrap from old capital goods is not manufacture and is not dutiable merely because it is separately classifiable.

Waste and scrap arising from old and used capital goods, including scrap generated during repair or maintenance, is not treated as manufacture under Section 2(f) of the Central Excise Act, 1944 and is not made dutiable merely because it is separately classifiable as waste and scrap under the tariff. The Tribunal followed Supreme Court precedent that such scrap does not arise from a manufacturing process and cannot be brought within Note 8(a) of Section XV of the Central Excise Tariff Act, 1985. Reference to Rule 57-S(2) of the Central Excise Rules, 1944 and the savings clause in Section 37 did not change the position.

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Issues: Whether waste and scrap arising from old and used capital goods cleared by the assessee was liable to central excise duty, and whether such clearance amounted to manufacture under Section 2(f) of the Central Excise Act, 1944 or fell within Note 8(a) of Section XV of the Central Excise Tariff Act, 1985.

Analysis: The dispute turned on whether the generation and clearance of scrap from old and used capital goods could be treated as manufacture. The Tribunal noted that the Supreme Court had already held that scrap arising from repair and maintenance of machinery does not arise from a manufacturing process and cannot be brought within Note 8(a) of Section XV. The Tribunal also followed its earlier view that used capital goods, when discarded as scrap, do not become dutiable goods merely because they are saleable or separately classifiable. The reliance on Rule 57-S(2) of the Central Excise Rules, 1944 and the savings clause in Section 37 of the Central Excise Act, 1944 did not alter the position in view of the controlling judicial precedent.

Conclusion: The waste and scrap cleared from old and used capital goods was not dutiable and did not amount to manufacture; the Revenue's challenge failed.

Ratio Decidendi: Scrap arising from the discarding, repair, or maintenance of old and used capital goods is not manufactured excisable goods and is not liable to duty merely because it is classifiable as waste and scrap under the tariff.

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