Incidental waste and scrap from tyre manufacture are not excisable goods where no distinct marketable product emerges.

Waste and scrap arising incidentally during the manufacture of tyres and other rubber products were not manufactured goods, because they did not emerge as a new, distinct and marketable commodity with a separate name, character or use. Mere saleability did not make the residue excisable, and the tariff scheme did not show any express inclusion covering this tyre-related waste. No excise duty was therefore leviable on the scrap, and the directives demanding duty were quashed.

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Issues: Whether waste and scrap arising during the manufacture of tyres, tubes, flaps and other rubber products are goods classifiable under Tariff Item 68 of the Central Excise Tariff and liable to excise duty.

Analysis: Excise duty is attracted by manufacture of goods, and goods must emerge as a new and different article having a distinctive name, character or use and ordinarily capable of being marketed. The waste and scrap in question were not produced as the end product of any deliberate manufacturing process, but arose incidentally during the manufacture of tyres and other rubber products. They were in the nature of refuse or residual material, and their saleability did not convert them into manufactured goods. The tariff scheme also showed that where the Legislature intended to tax waste or scrap, it did so expressly, whereas no such specific inclusion existed for the relevant tyre-related waste.

Conclusion: The waste and scrap were not goods manufactured by the petitioner and no excise duty was leviable on them.

Final Conclusion: The impugned directives requiring payment of excise duty on the waste and scrap were quashed and the writ petition was allowed.

Ratio Decidendi: Waste or scrap that arises incidentally in the course of manufacture, and does not itself emerge as a new, marketable commodity with a distinctive name, character or use, is not manufactured goods for excise purposes.

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