Scrap from old machinery is not excisable where it is not generated by mechanical working of metal.

Waste and scrap generated from dismantling old and used capital goods is not excisable as manufactured goods where it does not arise from the mechanical working of metal in the factory. Chapter Note 8A of Section XV applies to metal waste and scrap arising from working of metal and metal goods, and the Tribunal distinguished that category from scrap produced by cutting up obsolete machinery. It also accepted the line of authority that, absent a specific rule bringing such scrap to duty, mere capability of use or cutting of metal does not amount to manufacture. The demand was therefore not sustainable.

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Issues: Whether waste and scrap arising from old and used capital goods is liable to excise duty as goods manufactured under Section 2(f) of the Central Excise Act, 1944 and Chapter Note 8A of Section XV of the Central Excise Tariff Act, 1985.

Analysis: The dispute concerned scrap generated from old and used capital goods, not scrap arising from the mechanical working of metal in the factory. Chapter Note 8A of Section XV covers metal waste and scrap arising from the working of metal and metal goods. The Tribunal noted that the scrap in question did not fit that description. It further accepted the line of decisions holding that such scrap from dismantling old machinery is not dutiable in the absence of a specific rule making it so. The reasoning rejected the Revenue's attempt to treat the scrap as manufacture merely because the metal was cut and capable of use.

Conclusion: The waste and scrap of old and used capital goods was not dutiable, and the demand could not be sustained.

Ratio Decidendi: Waste and scrap generated from old and used capital goods is not excisable as manufactured goods where it does not arise from the mechanical working of metal in the factory and no specific rule brings such scrap to duty.

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